Please be positive and upbeat in your interactions, and avoid making negative or pessimistic comments. Instead, focus on the potential opportunities.
- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 3
About three months ago I sold 6/20/2025 $530 covered calls for $21.18 when the share price was around $530.
Two possible outcomes:
Firstly, the price at expiration closes higher than $530 and the shares get called. That was okay to me. I was willing to sell for $551.18 ($530.00 + $21.18 premium).
Secondly, the price at expiration closes below $530 and I pocket $2,118 per contract. Kind of like free money, because I wasn't gonna sell anyway.
Today, with the share price ~$485 and a few days before expiration it's likely I'll be handed the second outcome.
But then I got to thinking.
With the share price at $485 today, wouldn't it have been better to lighten shares at $530 three months ago and buy them back today for $485? Yes, of course. That's making $45 per share vs $21.
The problem is the price might have stayed high and you'd still be waiting to buy back, testing your patience, or the price drops like it did, and you wait for it to drop even more, really getting yourself into a mental pickle.
Oh, and before someone tells me that Charlie said to just hold the stock. I eat from my portfolio. But in the coming years I'll be transitioning to "sell 5% of shares every year" that Buffett recommended.
No. of Recommendations: 8
With the share price at $485 today, wouldn't it have been better to lighten shares at $530 three months ago and buy them back today for $485? Yes, of course. That's making $45 per share vs $21.
The problem is the price might have stayed high and you'd still be waiting to buy back, testing your patience, or the price drops like it did, and you wait for it to drop even more, really getting yourself into a mental pickle.
A simpler view is that you shifted the odds between likely return and maximum return. Even if the stock price had stayed precisely flat, you'd still have made the maximum return from the calls, which is pretty good.
I have been on average net short Berkshire year to date, and the stock price is up, but I've made a tidy profit. Not an immense one, but that's entirely fine by me. Valuations were high enough at the start of the year that there was no reason to expect a "price up" year as the most likely outcome.
The same is true now. Might go up, might go down, but "down" remains somewhat more likely than "up". To the extent that the future resembles the past in terms of observable value growth rates and valuation multiples, one might expect a one year real return of -6% from here as a rough guess ($459 per B next June in today's money, plus or minus a really big random number)
Jim
No. of Recommendations: 3
I sold the Jun 540 covered call a couple of months ago. Got sweaty when BRK-B hit 540, didn't want the stock to get called away and get hit with a very large capital gain. Then it dropped and I sold early. Made 75% of the received premium, so I came out ok.
Could not do it in any of my IRA/ROTH accounts because I had already sold all the BRK-B in them.
I think I'll just keep the dang stock in the taxable accounts and let the kids get them at stepped up basis when I check out.
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Somehow, youtube figured I had some interest in buying DITM LEAPs because for the last 2 weeks my feed has been inundated with LEAP video recommendations. I Watched a few of them and NONE of them explained DITM LEAPs the way Jim did.
One of them was titled "How to make $10,000 a month with a $200,000 account." I lol'ed and didn't watch that one.
Ooooooh.....youtube is owned by google. Google must have been listening to my internet activity and made a connection. Every damn thing we type or view is monitored by some company.
And my wife doesn't understand why I refuse to allow a camera or microphone to be connected to any of our computers and put tape over all the laptop cameras.
No. of Recommendations: 4
With the share price at $485 today, wouldn't it have been better to lighten shares at $530 three months ago and buy them back today for $485? Yes, of course. That's making $45 per share vs $21.
The problem is ...
There's a second problem ... taxes.
If I sold at $530, with my basis at around $30, the capital gain is $500. The capital gains taxes for me would be 23.8%, so I would have to pay 23.8% of $500, or $119 in tax. That leaves me with $411 in cash. If I think $485 is now a good price, I can only buy back less than 85% of the shares I owned previously!
It all depends on how you look at it.
No. of Recommendations: 1
“ The problem is ...
There's a second problem ... taxes.“ Good morning, our foreign friends might not know how our tax system works. My kid and two grandkids ages 8 and 12 live in LA, California. In an ugma account , the first 2500 $$ or so of taxable events gets favorable tax treatment in the kids accounts. Above that level every dollar of gains is taxed at the parents top rate. Approximately 22 percent for trump and an additional state tax of 12 percent ish for Gov Newsom. Can anyone even think of selling into that and sleep at night? Meanwhile Buffett and Gates can gift 100,s of billions of their untaxed wealth to their foundations tax free which get to enjoy the proceeds of stock sales, tax free. Welcome to America folks, where both parties are bought and paid for. Hopefully my kids all move to Nevada or another income tax free state when they retire and face RMDs etc.
