No. of Recommendations: 2
I wrote Jan'25 calls with a strike price of $430. That was on 29.Jan when BRK-B was at $385. The price of the calls were $8.15 then, so I received $815 per covered call contract I wrote, a bit more than 2% of the value of the underlying assets (100 shares of Berkshire stock).
Though the strike price of $385 I chose was $45 or 12% higher than the then current price of $385 it was not high enough to be on the safe side: In the following 3 weeks the price of BRK-B rose in a straight line to $430, the high on 26.Feb, so they were just in the money then. The price of my calls also did rise accordingly, if I remember correctly to around $24 or so, triple of what I received for writing them.
You are right, I could have bought them back on at that day of very high risk that if BRK-B rises further in the following days they might be called away. Had I done that (which I luckily did not do because I was unaware how high it did rise on 26.Feb) I would have booked a loss of $24 (price to buy them back) - $8.15 (premium received) = $15.85 per call respectively $158.5 per contract, a bit more than 4% of the value of all Berkshire shares behind those covered calls, realising double the loss (4%) of the intended profit (2%), a huge double whammy.
Max warned me before to chose a strike below +20%, saying it can be extremely expensive to buy the calls back when Berkshire rises so much that the danger is high that they are called away. He was right --- and I was sweating during those days (still not completely over).
