No. of Recommendations: 8
On the flip side of the coin when BRK is at lower valuations, have there been situations where you've found put buying (rather than selling) on BRK to be advantageous over buying DITM calls or simply buying stock outright?
No, I haven't been tempted by buying puts against Berkshire or other individual stocks. That's buying insurance against the possibility of a price drop, but I always welcome a price drop for Berkshire. It's pretty rare that I don't have some dry powder somewhere, even if I have to fumble behind the cushions on the couch.
I generally wouldn't see it as a very good wager, since Berkshire's price is so stable, generally speaking. I have made some money buying puts against other things (and lost some too), but it's pretty rare that I have conviction about an imminent large price drop. For a purchased put to work out, the price drop has to be reasonably big, and within the time frame that you have targeted.
I have bought a lot of puts as disaster insurance over the years, though not lately. e.g., when an index feels high and toppy, I buy a few puts at various long dated low strikes while they're cheap. I generally lose money on those on average. But the advantage is that on the rare occasion that it really pays off, it pays off precisely the day that you would like to have some extra cash to go shopping. If you include the returns from the things I've bought on those days that I would not otherwise have had the ready cash for, the puts I've purchased don't look so bad.
Reading your question, is it possible you meant put writing when the price is low?
Jim
