No. of Recommendations: 0
Proposed strategy
1. Holding 100% Berkshire in retirement account.
2. Selling covered calls 1 year out when valuation based on e.g. Mungo's rough estimate suggests forward returns of 10% or so. Demand 1.5% premium of call with strike price 15% over current price. So for example if stock is at 340 and predicted price is 374 in June 2024, sell covered call with premium of at least $5.1 with strike price 370.
3. If stock falls quickly and premium gain occurs quickly (like 50% gain in 1 month), consider covering call.
Has anyone examined this type of strategy?
It seems like since Berkshire is much easier to value compared to most stocks, this strategy might work quite well in a retirement account where taxes on activity are not an issue.
Of course if stock runs up past reasonable valuation and stays there for many years, you may never buy back the stock again. This however has not happened in the recent past (20 years).
