No. of Recommendations: 1
Jim,
If you you have time, could you give a few more details on your approach?
I'm particularly interested in point 6, i.e. the general idea of safely levering up and using part of the 'savings' to buy protective puts and/or something else.
1) Isn't a big point of the strategy the control of shares of BRK with the DITM call, at say 50% of the share cost, i.e. the big point is leverage?
Capturing the sold call premium is pleasant, you indicate you sell calls when BRK seems over-valued, and not continuously.
2) Buy perhaps 50% DITM LEAPS calls?
3) Write perhaps three months out calls, maybe 5% OTM?
4) If stock price rises you roll the sold calls, don't hold to expiration, so try to avoid assignment?
Roll on what criterion? If you were assigned, presumably you'd sell the DITM call to buy the assigned stock?
5) If stock price falls, the sold call premium is kept and the long LEAPS call moves basically dollar for dollar with the stock.
6) One saves roughly 50% if buy a 50% DITM LEAPS call over buying shares outright.
What to do with those saved funds?
- One thought is to buy some protection i.e. buy some puts on BRK.
- If one has good candidates in mind one could diversify into other investments.
- One could stick some or all of it in T-bills to have 'dry powder' to take advanatage of a big market drop, and gain 4% or so interest meanwhile.
- a combination of all of the above
Thanks!
