Post #8266 by Engr27 on the Berkshire Hathaway board

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

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The realized profit was the equivalent of $4.78 per B share that I committed to (conditionally) buy, in 16.5 calendar days. The stock price is up more than that, but of course I didn't actually have to buy any stock to get the profit...I kept earning interest on the capital.

Any time I've written puts like this, and then closed them a short time later for a substantial fraction of full profit, my first thought is: "if I had just bought the stock and sold it, my profit would have been (say) 3X."

But a cash-back short put can be viewed as selling the stock's upside (because you don't believe it has much upside). A hidden advantage of the short put is that there isn't the nagging question of whether to sell after a run-up. With the stock you never know when to take the profit, while with the put it is a little more obvious due to its capped profit.

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