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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 1
I am definitely not recommending that anyone try some gambling by buying puts against Berkshire. As an example of such absurdity, September $440 strike would cost about $7.60 right now, so you'd likely be throwing that money away.
Jim
No. of Recommendations: 1
You seem to be well informed about current prices of puts. I wonder why. 😉
No. of Recommendations: 3
FWIW- Trimmed my first slice of BRKB today ($483.75) in a brokerage acct. to help fund some family & retirement expenses, beyond the beer & pizza. Feels a bit strange quite honestly, although I knew it was inevitable and part of the bigger plan. Anyone else trimming here?
No. of Recommendations: 3
yes, I did last week. took out 6 months worth of living expenses and home projects....its a very weird feeling....made me very uncomfortable...I had also seen all these recent articles on switching from saver to spender... I have always been a bit of both, but this time was different as I was selling BRK.....
No. of Recommendations: 5
If you want to buy puts, wouldn't it make sense to by puts on a some stock index or some other commpany, rather than Berkshire? Berkshire is already in a relatively defensive position with its cash pile. I am skeptical that Berkshire is the most overpriced thing out there.
No. of Recommendations: 2
I am skeptical that Berkshire is the most overpriced thing out there.
But it is the easiest to value. I already made some money buying puts the last time the stock was this high. Not enough yet to cover my loss from selling some shares for $440 though :-)
No. of Recommendations: 7
If you want to buy puts, wouldn't it make sense to by puts on a some stock index or some other commpany, rather than Berkshire?
Sure. Lost of other stuff will drop more, and is likely to stay down.
The only advantage of Berkshire in this context is that it's very much more predictable in terms of its valuation range, and it can be easier to figure out the various net outcomes if you also have long positions.
Jim
No. of Recommendations: 3
Engr27 expressed it perfectly: But it is the easiest to value.
Not always, but mostly. I still have puts with strikes $390-410 I bought in the first half of last year when from around $400 Berkshire did shoot up to $440-450, convinced it won't remain at that relatively(!) high valuation forever. As it did not but went even higher and higher those puts are near worthless currently.
But I made far more money than I lost by then being more conservative and buying puts again only when it really got extreme (in my view) => over $470. And then not long running puts with strikes 10% lower, thinking within a year Berkshire might come back a lot. Instead puts just $10-15 lower than current price. A different strategy, betting on a quick counter reaction of a few % down after a spike upwards from an already for Berkshire "extreme" level. With expiration 2-4 months out as it's a short term strategy but I can't bring myself to buy puts expiring in 1-2 weeks, that would be too much for my nerves. I need a little "margin of safety" = time.
That short-term strategy up to now worked every single time in the second half of last year and this year. I bought when the price did quickly rise to $470-480, and sold a few days or weeks later --- with me having bought just the day before Jim's warning puts again (strike $465 and $470, expiration May and June).
The context to "easiest to value": This $470-480 level seems to be for many investors too far above Berkshire's usual Price/PeakBV valuation "channel" I posted not long ago, too extreme, therefore if there is a spike upwards at that already high level, then many can't resist the temptation to use this excellent opportunity to quickly sell Berkshire shares (that's at least my interpretation of why then always this "fallback" happens).
No. of Recommendations: 1
Not always, but mostly. I still have puts with strikes $390-410 I bought in the first half of last year when from around $400 Berkshire did shoot up to $440-450, convinced it won't remain at that relatively(!) high valuation forever. As it did not but went even higher and higher those puts are near worthless currently.
I don't quite understand this. If you bought the puts between 440-450, there were multiple opportunities after that where the stock was lower. Even a month ago, it was close to 440 again (maybe could have rolled them?). But in 2024, it was briefly below 415 sometime in July/August.
In general, I prefer to sell options rather than buy them. That way I benefit from the decay of time value rather than losing from the decay of time value. You can use the same strategy as you described earlier, but instead of buying puts when you think the price is high, you sell calls. And likewise, instead of buying calls when you think the price is too low, you sell puts.
No. of Recommendations: 0
If you bought the puts between 440-450 there were multiple opportunities after that where the stock was lower. Even a month ago, it was close to 440 again
- I am not so sure about "multiple opportunities". Looking at a 1y chart I see one perfect opportunity: End of July/beginning of August the stock was down to below 430. Had I not been so stubbornly convinced the price would retreat to roughly my strike prices of around 400 then, yes, I definitely should have then sold them. That was my big mistake!
- Otherwise I see only 2 big spikes down to around 450, plus 1 month ago to around 440. In all 3 cases thanks to the decreased time value those long ago bought puts were already near worthless (-80% or more), so I decided to just hang on and wait for a miracle (as just happened when I sold on Friday with only a tiny loss 1/2 of my BABA calls which until just one month ago were hopelessly under water).
You can use the same strategy as you described earlier, but instead of buying puts when you think the price is high, you sell calls.
I would never sell naked calls or puts. For that I am not gambler enough. Without an for me unacceptable high risk only buying calls or puts give me the very high leverage I want when I think Berkshire is at the lower/upper range of it's valuation.
(I am fully aware that I am an options amateur. So if what I think about theoretically unlimited (selling calls) respectively nearly unlimited/extremely high (selling puts) risk is wrong (without using complex option strategies), please correct me.)
No. of Recommendations: 5
I am definitely not recommending that anyone try some gambling by buying puts against Berkshire. As an example of such absurdity, September $440 strike would cost about $7.60 right now, so you'd likely be throwing that money away.
Similarly, anyone buying September $460 puts today for $8.00 would be foolishly wasting their money.
I have not written any January 2026 $500 calls. They are trading at $44 today. For somebody long the stock, would it be sensible to commit to sell at a net exit price of $544 at that time?
That's 17% more than a "normal times" guess like book of $332 (up 10.4%) and price of $465 (1.4 times book). Or, of course, you get to keep the $44.
Jim
No. of Recommendations: 0
Similarly, anyone buying September $460 puts today for $8.00 would be foolishly wasting their money.
Really? In that case, if there are people throwing their money away, why not pick it up off the ground? (By selling those Sep 460 puts for $8, of course)
No. of Recommendations: 3
Similarly, anyone buying September $460 puts today for $8.00 would be foolishly wasting their money.
...
Really? In that case, if there are people throwing their money away, why not pick it up off the ground? (By selling those Sep 460 puts for $8, of course)
Well, I was mainly mocking myself. I was buying those puts...not prudent capital allocation, but every loaf needs a little leavening. Investing for entertainment value is not prudent, but a tiny bit at the edge is probably not fatal.
Jim
