No. of Recommendations: 8
Looks like someone said the heck with the time value of this option over the next 2 and a half years, I want you to buy my shares.
I sold this put for $112.49, so my purchase price of these Berkshire shares is equivalent to $497.51 a share. Not a great price compared to what I could buy it for today.
The entry price was known when you sold the put, so one hopes that you'd be happy with that entry price, though there is (ahem) quite a bit of variability of exactly when you might enter--and you got an entry a LOT sooner that one might usually expect. Since you picked an option with such an extremely high strike price, you probably garnered very little time value, which means you were probably a buyer when the stock price was a little above $497, which I consider a bit rich this season. So in one way the moral of the story is to add to your long exposure more when the stock is cheap, no matter which security you use to do it.
(Note, I've written some puts lately, and they are losing money on average at the moment, so I'm not saying I know the future either)
Sometimes the reason that an option with apparently lots of time value left gets exercised is that the time value remaining is not the apparent value, but the value the person could actually realize by selling it, meaning it depends on the bid. If the option is very far out of the money as this one was, the bid/ask gap can be a chasm. Plus, being so far out of the money, the time value itself is small. Thus the sometimes you'll see lots of time value at the midpoint of bid/ask, but no time value you can actually realize by selling at the bid.
At the moment that contract has a bid/ask of 135.00 / 139.00 and an in-the-money value of $136.38. So selling the option at $135.00 would get a holder less money than exercising the option and selling the stock at today's price.
Jim
