I think that if you are not a day trader, taking a short position on BRK is a dumb risky thing to do. Puts, calls, whatever.


Selling puts is not taking a short position on Berkshire, though; it has more in common with a long position. It is saying that I am sure enough of Berkshire's future to take the risk of owning the stock at lower prices.

Another way of thinking of it is that being short puts is owning the downside, just like it would be if you owned shares, in return for the put premium, and without the upside. If you own the calls, then you get the upside, without the downside risk, which you basically rid yourself of by paying the call premium. Combining the 2 kinds of options (at the same strike price), you have the rough equivalent of just owning the stock, for the time period up until the expiry of the option, with both the upside and the downside. So when I write my puts, I am saying I am reasonably confident that the shares will not go a lot lower, but I'm not so excited about the upside in the next 9 months.

Berkshire Hathaway FAQ

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