No. of Recommendations: 2
This guys timing has been terrible but in this piece he makes a compelling case with respect to current valuations.
All sorts of people make "a compelling case" all the time. Most of them don't pan out and they quietly forget their prediction.
"I don't need to know what's going to happen next. I just need to know what I'll do in response to whatever does happen."
Go with the trend until the trend changes.
I got scared out of the BRK-B 260 Jan'26 call when the P/B got to 1.55. Sold at 150 for a 16% gain.
Now it's going for 235 which would be a 81% gain.
When I sold, BRK-B was 383, now is 480.
No. of Recommendations: 8
I got scared out of the BRK-B 260 Jan'26 call when the P/B got to 1.55. Sold at 150 for a 16% gain.
Now it's going for 235 which would be a 81% gain.
When I sold, BRK-B was 383, now is 480.
Instead of buying those calls for ~$130 (150 - 16% gain), you could have simply bought stock for ~$320 (half as many shares) and now had a ~50% gain in a much simpler manner, with fewer decisions to be made. Buying high priced (ITM) calls gives you a little leverage, but you then suffer the loss of that time premium week after week after week.
No. of Recommendations: 9
Instead of buying those calls for ~$130 (150 - 16% gain), you could have simply bought stock for ~$320 (half as many shares) and now had a ~50% gain in a much simpler manner, with fewer decisions to be made.
When I bought the call, BRK was 358, the Jan'26 260 call was 129.47.
When I sold the call, BRK was 383 (up 7.0%) and the call was 150 (up 15.9%). 2.27X leverage.
Of course there was no way to know that BRK would continue going up to near 500. You cannot fault yourself or others for not having a crystal ball.
...fewer decisions...
It's not a lot of decisions. Grab the P/B once a week or month, see if it is below 1.35, if so sell 1/2 the shares and buy DITM LEAP.
Or above 1.55, if so sell the LEAP and buy shares.
Buying high priced (ITM) calls gives you a little leverage, but you then suffer the loss of that time premium week after week after week.
When done right -- meaning at the proper P/B to buy -- the time value isn't all that much.
Eyeballing some of my old data, the TV looks to be around 15% of the call's price.
The delta is close to 1, giving you about 2X leverage.
Now, of course, is not the time to be buying DITM LEAPs.
...gives you a little leverage...
Depends on how you think if it. To an options dabbler, 2X leverage is pathetic.
To a stock dabbler, 2X leverage at a low (pseudo-)interest rate is pretty darn good.
Don't think of this as an options strategy; think of it as a cheap leverage strategy.
An UNCALLABLE fixed-duration margin loan.
No. of Recommendations: 1
When done right -- meaning at the proper P/B to buy -- the time value isn't all that much.
Also, time value decay is minimal when buying leaps and not holding past one year to expiration.
