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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 21937 
Subject: Re: out of the gate strong
Date: 01/26/24 3:37 PM
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I've never used options before. Just to confirm, if you sell June $385 call options for $14.56 the buyer pays you $1,456 (100 x $14.56) per contract?

Yup.

The owner of that option then has the ability to force you to sell them stock at $385 any day they like, up until expiry. (you have already pocketed their premium, so this is $385 more). However, in practice they will never do so so long as they can get more benefit by selling the option on the market while it still has some time value in it.

If the stock price is flat it will make a profit very slowly: you are short something that is gradually falling in price. Layered on top of that trend: If the stock price rises the contract will have a higher market value (bad for you) and vice versa.

You can buy back the contract any time you like. If the stock price dips, even for a short period, the mark-to-market profit on the call you sold can be quite high...good time to take the profit. If the stock bounces back up to high valuation levels you can do it all over again.

The calls I've written just recently are looking bad for now, because the stock is still soaring. I still expect a lower price at some point, and the ability to close them at a profit. I have the tail wind of the time value: as mentioned, if the stock price is flattish they gradually make money.

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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