No. of Recommendations: 8
Following up here, for 29-July-25, looking at options expiring on 19-Sept-25:
BRK-B at 476.56, Current trendline at 129.8753, CPI at 319.799, thus target price 415.34, stdev at 11.41% (over 20 years). With that, we have out CALL target at 462.75, and our PUT target at 367.93
There are no calls with strike + premium < 479 from a strike of 250 all the way to 700. Would the right thing here be to choose a strike of 460 or 465?
The put at 370 is a bit high, but has a time value of only 0.22/share (that is,0.06%, or annualized 0.4%). It is waaaaaay out of the money.
Would these be the right ones to sell?
Not to answer here, but to ask more questions. I haven't followed this discussion closely, but I'm interested in potentially selling cash secured puts on BRKB, at a strike price at which I'd be happy getting the stock assigned.
I don't understand your call and put target prices. The call target is below the current stock price. So you might get a high premium (21.80) from selling a covered call at that strike, but you're quite likely to have the stock called away. It seems in that case that you'd be wise to just sell the stock outright.
As for selling cash secured puts at a strike of 370, there's a very high likelihood that the puts will expire worthless. But as you note, you'd be tying up a substantial amount of cash in exchange for a measly annualized return of 0.4%. What good does that do?
It seems to me that if you think a 460 or 465 is a price at which you'd be happy to own the stock, then you'd be selling a cash secured put at that strike. The latest bid on the 465 is 7.05. That's about 1.5% of the stock price, which translates to an annualized return of about 9%, if I have it right. I think that would be a reasonable position to take, although it's an unimpressive return. BRKB options are cheap, in line with the stock's low volatility.
I hope I'm getting any of this right, and I'd be happy to stand corrected if I'm wrong.
Elan
