Are those that write covered call writers relatively content if their net profit (from writing calls+forced sale of shares) is over 1.55 range as well (say for June 2024 calls) or is there a different goal and mindset?

My thought process goes like this. I believe I can reasonably say Q4 BV will come in around $260.50 which will be a new peak BV. If we look back at history the stock has traded at a max of 1.6x BV since 2013 which to me says ~$415 is the max price we will likely see between now and the end of March (end of Q1 when we can reasonably estimate the next BV).

If you want to go one step further into the predictive dark arts, one could say if we were to close the Q1 books today we could “reasonably” assume a BV for Q1 to be ~$265. This would imply a max share price of ~$423 until the end of Q2 in June. I don’t put much faith in that number but it gives one an idea of what might be possible. Even a poor estimate is better than none at all in many cases.

If we also look at it through the lens of intrinsic value, I personally think we ended the year with IV around $380 and maybe we can get to something like $424 at the end of 2024 so both of those numbers would seem to imply we are trading near IV today and any premiums received on June options would put break even prices near IV in the future. And BRK has rarely traded at IV for very long in the last decade.

I personally have a multitude of strikes sold between March and June with break even prices of $367 to $406. I like to keep them in my tax free accounts to avoid being forced to sell any long term shares I’m holding in my taxable accounts. I’m sure there are share prices where I might be tempted even in my taxable accounts, but I’m not there yet. My goal is only to try and turn some what may be short term exuberance in the share price into a more permanent increase to my account balances.

Jeff

Berkshire Hathaway FAQ

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