No. of Recommendations: 1
"Speaking of Jan. BRKB options, any thoughts on holding vs. selling to close a portion (or all) of Jan.2024 240 calls? Price has nearly doubled since purchase last Summer and are now in the LTCG category. No acute need for the cash, but just a consideration given the solid appreciation and already own a good bit of the stock."
I have the current price at about $136, with BRK.B trading at $362. So a breakeven of $377. Basically a 4% return, nominal and non-annualized, from here, to breakeven.
I sold out of my call options over the last little while on the premise that reasonable expectations (with respect to my contracts) from here were, at best, breakeven. That's how I'd view the Jan 24 240s if I were holding them. At today's book, for instance, you are betting that the BRK hits about a 1.51-1.52 ratio before the close of the year. Using today's book is a bearish assumption, of course, but with only 1 quarter remaining to report, it isn't too bearish.
I use options enough that I can't say they're a "special case", but I am reluctant to carry too much exposure during periods of relatively reasonable prices. What's the odds we return to 1.35-1.36 book, before 1.51-1.52, for instance? The former has been about the median result in recent history; the latter well into the upper quintile.
All of this is before getting to the value of adding the option to add leverage by closing out the options today.
For all the above, I wouldn't think of making the Jan24 240 trade today, and I'd be pretty reluctant to keep holding it. But I admittedly do have a habit of bringing in my winners a little early.
