I recently completed 3 months of covered call writing on BRK-B and got an additional 9.4% APR boost from my 100 shares of BRK-B by doing this. That is, the stock itself went from $397-$405 during this period, but my covered call yield was as if its price had gone from $397 to $415 during this 89 day period.


Some Details:

* I started selling covered calls on 2/7/24 when BRKB was at $397
* I closed my last covered call position 5/6/24 when BRKB was at $405
* During that 3 month period I had 7 positions.  
* The positions were held from 1 day up to 31 days.
* I had a covered call position open 73 of the 89 days during that period
* Of the 7 positions, 5 made money and 2 lost money.
* My net in 89 days was $944, or an APR of approximately 9.4% boost on the return to my shares.  
* I aimed to open positions by selling calls with Strike = Price on the theory that these had 
       the highest time-premium for me to harvest
* Most of the time I aimed for the next options expiration date, up to 7 days away, on the 
       theory that this gave me the most time-premium per day to harvest
* 3 out of the 7 positions were for 2 to 4 weeks out.  These gave me both my highest gain and 
       my highest loss results.  

Summary and Conclusions:

*  A 9.4% boost on the APR of my stock is worth pursuing further.  
*  This was achieved during a quarter when the stock itself yielded APR 0.5%
*  One would expect to lose money if Covered Calls were written while the stock was rising
        I'm not sure of the math, but does the covered call strategy make money as long as 
        the stock is rising < 9.4% APR?  That seems unlikely.
*  I paid to close ITM positions rather than having my stock called, for convenience.
*  If I were to mechanize this strategy, I think I would order 
        limit sells when position makes 90% of max possible
        stop loss orders at loss = 3x max gain, since jumps up in stock price are way stronger
        than log-normal predicts.  (Fat tails on the positive return side for stocks and calls)</pre

Although Mungofitch counsels thinking of this strategy as a hedge, and therefore says don't account for the call positions independently, I think my two choices are
1) Hold the stock "buy and hold" and see how much I make
2) Hold the stock plus decorate it with covered calls and see how much I make
     In this case, whether the hedge of covered calls is worthwhile or not depends entirely on 
     whether the covered calls themselves yield, on average, extra return or whether they cost 
     money to maintain.  In my case, my plan would be to buy the shares back if they got called 
     away.  If Mungofitch would stay out of the BRK position until the buy-back-in price got 
     down to his liking, then he might question this way of evaluating things, although I would 
     think it would be hard to deviate too far from the results suggested.  

Of course I have done this for a grand total of 3 months when the market was flat. It would be insane to count on my conclusions being exactly the same after doing this for a year or two years. But on the other hand, one would naively expect my results to be equally likely to be either better or worse than what I have seens so far. To have made 9.4% APR in a slightly rising market would be wonderful if it persisted.

Berkshire Hathaway FAQ

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