Hi, Shrewd!        Login  
Shrewd'm.com 
A merry & shrewd investing community
Best Of BRK.ABest OfAll BoardsThe Shrewd’m WeeklyLearn to InvestHow to Become Shrewd
Search
Shrewd'm.com Merry shrewd investors
Search
Best Of BRK.ABest OfAll BoardsThe Shrewd’m WeeklyLearn to InvestHow to Become Shrewd


The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
Answer this questionContinue to Shrewd'mThis note won't appear again
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
Unthreaded | Threaded | Whole Thread (7) |
Author: mungofitch 🐝🐝🐝 GOLD
SHREWD
  😊 😞

Number: of 21944 
Subject: Re: An option has been assigned
Date: 04/20/26 1:27 PM
Post New | Post Reply | Report Post | Recommend It!
No. of Recommendations: 8
Looks like someone said the heck with the time value of this option over the next 2 and a half years, I want you to buy my shares.
I sold this put for $112.49, so my purchase price of these Berkshire shares is equivalent to $497.51 a share. Not a great price compared to what I could buy it for today.


The entry price was known when you sold the put, so one hopes that you'd be happy with that entry price, though there is (ahem) quite a bit of variability of exactly when you might enter--and you got an entry a LOT sooner that one might usually expect. Since you picked an option with such an extremely high strike price, you probably garnered very little time value, which means you were probably a buyer when the stock price was a little above $497, which I consider a bit rich this season. So in one way the moral of the story is to add to your long exposure more when the stock is cheap, no matter which security you use to do it.
(Note, I've written some puts lately, and they are losing money on average at the moment, so I'm not saying I know the future either)

Sometimes the reason that an option with apparently lots of time value left gets exercised is that the time value remaining is not the apparent value, but the value the person could actually realize by selling it, meaning it depends on the bid. If the option is very far out of the money as this one was, the bid/ask gap can be a chasm. Plus, being so far out of the money, the time value itself is small. Thus the sometimes you'll see lots of time value at the midpoint of bid/ask, but no time value you can actually realize by selling at the bid.

At the moment that contract has a bid/ask of 135.00 / 139.00 and an in-the-money value of $136.38. So selling the option at $135.00 would get a holder less money than exercising the option and selling the stock at today's price.

Jim

Post New | Post Reply | Report Post | Recommend It!
Print the post
Members reply directly to mungofitch here — and replies get answered. Reading is free; so is joining the conversation. Join Shrewd'm »
This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
Unthreaded | Threaded | Whole Thread (7) |


Announcements
Berkshire Hathaway FAQ
Contact Shrewd'm
Contact the developer of these message boards.

Best Of BRK.A | Best Of | Favourites & Replies | All Boards | Followed Shrewds | Open Questions | Moving a community