No. of Recommendations: 1
Feb 27 2024: BRK 494 VIX 18
Suppose you bought the 50% DITM BRK call below (discussion will be `per share' for simplicity, and not `per contract'):
Jan 15 2027 (687 days) strike 250 call bid 267.50 ask 272 mid 269.75Okay. Let's say you buy this call on 2/27/25 for $269.
You'd be buying puts and losing about 14.25 every 65 days for the life of the call of 687 days.And let's say you buy a put every 65 days for $14, but only lose half of it on the roll, so you sell the put for $7 and buy the new one for $14.
Now, let's say the stock is 600 on January 15, 2027.
Here are your cash flows and your internal rate of return. Looks like you just barely break even. Why bother in the first place? Just buy half as much stock for 500 instead, do nothing for 2 years, and get a nice 20% return over the period!
2/27/25 -269 buy 250 strike call
2/27/25 -14 buy first put
5/3/25 7
5/3/25 -14
7/7/25 7
7/7/25 -14
9/10/25 7
9/10/25 -14
11/14/25 7
11/14/25 -14
1/18/26 7
1/18/26 -14
3/24/26 7
3/24/26 -14
5/28/26 7
5/28/26 -14
8/1/26 7
8/1/26 -14
10/5/26 7
10/5/26 -14
12/9/26 7
12/9/26 -14
1/15/27 7 sell last put
1/15/27 350 sell 250 strike call
XIRR 0.67%
