Post #3085 by Engr27 on the Berkshire Hathaway board

Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)

Unthreaded | Threaded | Whole Thread (31)

Post New | Post Reply | Report Post | Recommend It!

No. of Recommendations: 0

So, I closed my January $350 calls at a loss, and wrote new January $365 calls instead.
The time value in the $350s has fallen a lot, from the original $19.35 to $16.89.
This is because time value peaks when the stock price is at the strike price. As the stock has moved up, the time value has fallen.
So, that takes a few dollars of sting out of the mark-to-market loss I'm now realizing because the calls I wrote are now in the money by about $12.90.

So, the trades, including commissions:
Buy to close Jan $350 calls for $29.79, breakeven $379.79
Sell to open Mar $365 calls for $23.91, breakeven $388.91

I don't understand in what sense $379.79 is a breakeven?

The net premiums received are: +19.35 - 29.79 + 23.91 = +13.47

And with the $365 call, isn't your new breakeven = 365 + 13.47 = $378.47

Always willing to be wrong ...

Post New | Post Reply | Report Post | Recommend It!

Print the post

Unthreaded | Threaded | Whole Thread (31)

Prev | Next

Announcements

Berkshire Hathaway FAQ

Contact Shrewd'm
Contact the developer of these message boards.

A community forum supporting civilized, and highly helpful, self-educating investors that come together for Shrewdness and merry spirits. These message boards closely follow the look and feel of the old message boards at boards.fool.com prior to the boards redirected to discussion.fool.com. Shrewd'm is not affiliated with the comprehensive and excellent investment website, The Motley Fool (TMF), in any way. The Shrewd commmunity here has owed, and continues to owe, gratitude to The Motley Fool for nurturing a culture of jovial irreverence towards Wall St, and that tradition will continue here.