No. of Recommendations: 5
Mungofitch:
FWIW, it might be an OK time to start a covered call position in Berkshire.
Don't mind if I do! BRKB 440 Call June 20/2025 sold for $38.50
But that's pretty elaborate way to go about life, for people who think they are smart. (not to be confused with people who are actually smart)
Guilty as charged! You may notice that my short call position is sold at a strike that is AT the money, and expires nearly a year from now. How did I pick that?
1) Chose Strike at the money because that maximizes the time-value of the option I am writing. In some real-ish sense, the time value is where the profit in covered calls comes from, so why not pick the highest? (No, really, if I shouldn't have picked the highest I would love it if you would tell me why)
2) Chose long-ish date out because the hypothesis is BRKB will be trading for less than its current price sometime within the next year. If I hold this position until expiry and it expires worthless, I will have made $38.50 on a $401.50 investment in 10 months, or 11.6% APR.
Anyway, we shall see. My break-even is $478.50/shr, that is if the stock is called from me I will have sold it for essentially $478.50, which is a pretty high price.
Crossing my fingers that this will be fun,
R:)
