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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
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Number: of 21941 
Subject: Re: Covered call?
Date: 03/14/25 2:24 PM
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No. of Recommendations: 10
I generally go at the money or only a pinch above, about 3-4 months out. It gives you a whole lot of premium. This isn't the conventional wisdom.
...
Any covered calls looking juicy? For June you could write $530s for $13 premium for an exit of $543.


If one were to consider writing calls against one's long position (turning a long position into a covered call position), then yes, I think this would perhaps be an excellent day to consider it.

The choice of strike is pretty personal, and depends on a lot of things like how resistant you are to letting your calls get exercised. (which should be low, if you're thinking of writing calls at all). If I hadn't already in effect written calls against my entire long position, and given how fully valued the stock seems to be at the moment, personally I'd probably be looking at the $520s (bid $19.30), maybe even $515s (bid $21.80).

If those $515s were exercised, you'd be selling at 515+21.80= $536.80. At "normal" valuation multiples you'd expect the price to be in the $420s these days and maybe the $440s in June, give or take? So an exit of over $525 is not objectively a bad thing, if you're willing to sell at all.

The main advantage of higher strikes is that it just reduces the emotional sense of feeling foolish if the price rises a whole lot more: having done something that was perfectly rational, but with hindsight you'd have been better off in this universe had you not done it.

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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