tadthedog wrote:
Given that covered calls on BRK has come up, the following may be of interest:

https://static1.squarespace.com/static/641cca1972c...

The link flogs a service "Berkshire Covered Calls Program" which returns a pretty smooth 8.1%/year from 1/1/2011 through 12/31/2023.

The brochure compares this to a bond fund returning a fraction of this... see? Its better!

What the link doesn't discuss is just putting your money in BRK as an alternative. I checked that and during the same interval, BRK stock returned 12.6% / year.

Or put another way, over that interval BRK 4.7X your money while this fund 2.7X your money.

So for the life of me it looks like the covered call program did what you would expect:
1) shaved off returns when the stock was rising fast
2) filled in returns when the stock was falling or flat

With the net being a SMOOTHER curve at the cost of NET SLOPE (or NET RETURN).

Considering this smoother slope cost you 4.5% on your average return. It would be like paying a manager 4.5% to smooth your return for you. Yikes! Why?

R:

Berkshire Hathaway FAQ

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