No. of Recommendations: 9
But...few stocks go "up a lot" every quarter. It's a pretty infrequent thing, for most stocks.
...
Doesn't seem to be the case for BRK.
Assuming that Yahoo historical quotes are right for BRK-A, 24% of months had a gain more that 5%.
PORTFOLIO VISUALIZER data shows 104 of 467 month (May'85 thru Mar'24) had return more than 5%. That's 22.2% of months.
I wouldn't count a 5% move as "up a lot". The weighted average premium for the calls I have currently is 7.6% of the strike, and they were all somewhat out of the money when written. In absolute terms, the premiums were about $25-$31. The round before was a little less, closer to $20.
As discussed in other posts, the question isn't the likelihood of "up a lot", it's the likelihood of "up a lot starting from a high valuation level". And even then, your bad outcome is "selling some stock at a price higher than an already high starting valuation level, but not as high as where the stock happened to be trading at expiry". That's not exactly a disaster scenario.
So, your outcomes are:
* Down a lot, you keep the premium, bad on a mark-to-market basis but better of than if you'd stuck with plain stock
* Down a little, you keep the premium, better of than if you'd stuck with plain stock
* Up a little (but not above strike), you keep the premium, better of than if you'd stuck with plain stock
* Up a little (above strike, but not above strike+premium), stock called away if you wait till the end, though you could immediately buy it back. You keep part of the premium, better of than if you'd stuck with plain stock
* Up a lot (above strike+premium), the case discussed above. You got an exit price maybe 10+% above a high starting valuation level, so you did well, but worse off than if you hadn't done the deal AND had sold at the high price at the expiry date. You might be able to buy back in at a lower price, possibly not.
The key is that these rosy views only work if you never write a call unless the stock seems richly valued to start with.
Jim
