Bullish stocks usually offer total income investors better odds of making profits when they sell covered calls to generate income from premiums, dividends and capital gains.
5.7.25. Steve Sears, the options columnist at Barron's, today suggested that investors sell BRK/B June 20 $545 covered calls for about $4 a share. I posted this comment on his excellent post:
I think selling the BRK/b June $545 strike covered calls for $4 a share, or $400 per 100-share covered calls option contract would be a profitable 44-day trade.
Wednesday, BRK/b closed at $518.22 per share, or $51,182.20 per 100 shares.
Based on Wednesday's closing price of $513.22, an investor could sell BRK/B June 20 expiration $545 strike covered calls for about $4.35 a share, or $435 per contract. The stock would have to gain about 5.2% to be called.
The delta, or risk of assignment, is .24. The probability of closing out of the money, or below the $545 strike, is a fairly safe 77.78%. The net debit ($545-$4) would be$541. The annualized return on risk (ARoR) would be about 7%. The implied volatility is a relatively low 17.69% compared with a historical volatility of 35.32%. Low IVs give sellers low selling prices for their puts and calls options.
This would be a trade for investors who expect BRK/b to trade between its current and strike prices between now and the June 20 expiration of the call options.
Only six Wall Street sell side analyst published target prices and rate the stock. Of those six, two rate BRK/b a buy and four rate it a hold. Their average 3.67 rating for BRK/b out of a possible 5 is called a moderate buy rating by Barchart.com. Of the 13 momentum indicators tracked by Barchart, 88% are buys.
I don't have that visibility in these markets. So after BRK/b fell about $50 a share Monday, I sold BRK/b 5.9.25 $485 puts for a ARoR of 7.9% on a four-day trade.
M* estimates that BRK/b's fair value is $750. It gives the stock two stars out of a possible five stars. Two stars is a sell or hold rating, I think. A one star price fair value estimate is $913,125 per share. A five star FVE is $584,400.
Pre market traders are bidding $522.14 for BRK.b. The ask is $522.70. BRK.b closed Friday at $539.80.
Six Wall Street analysts published price targets on BRK.b. The high target price is $606.00. The mean target price is $533.25. The low target price is $470.00. Their average rating is about a hold at 3.67. Four of the analysts rate BRK.b as a buy and two rate it a hold.
Berkshire Hathaway’s Warren Buffett is famous for having a near photographic memory and the skills and talents needed to use the markets’ history to make a lot of good stock and options trades and a few bad ones.
It is one thing to remember history. Learning from history is an art and skill. Few investors have Warren Buffett's memory and know what to do with inside information when they have it.
There is no question that artificial intelligence agents that quickly survey the literature and history of any topic that an experienced prompt engineer or other researcher asks about can compete with Trump's memory. Replicating his wisdom and helping people use the history to make business and life decisions is another issue.
Berkshire has outstanding portfolio managers who have worked for Buffett for years. They may be able to use AI plus their personal skills to make good trades and investments for Berkshire (BRK/a, BRK/b). Time will tell.
But remember that Buffett is one of the best financial PR flacks in the world. He knows how to sell his stock and himself while not telling investors what they really need to know about investing in him and his highly diversified conglomerate..
The stock usually moves with the S&P 500, which is why Buffett recommends buying the exchange traded fund, SPY. When he says own SPY, I think, he really is saying Berkshire. I don't own Berkshire, but I may sell some cash secured puts on the stock.
5.7.25. Steve Sears, the options columnist at Barron's, today suggested that investors sell BRK/B June 20 $545 covered calls for about $4 a share. I posted this comment on his excellent post:
I think selling the BRK/b June $545 strike covered calls for $4 a share, or $400 per 100-share covered calls option contract would be a profitable 44-day trade.
Wednesday, BRK/b closed at $518.22 per share, or $51,182.20 per 100 shares.
Based on Wednesday's closing price of $513.22, an investor could sell BRK/B June 20 expiration $545 strike covered calls for about $4.35 a share, or $435 per contract. The stock would have to gain about 5.2% to be called.
The delta, or risk of assignment, is .24. The probability of closing out of the money, or below the $545 strike, is a fairly safe 77.78%. The net debit ($545-$4) would be$541. The annualized return on risk (ARoR) would be about 7%. The implied volatility is a relatively low 17.69% compared with a historical volatility of 35.32%. Low IVs give sellers low selling prices for their puts and calls options.
This would be a trade for investors who expect BRK/b to trade between its current and strike prices between now and the June 20 expiration of the call options.
Only six Wall Street sell side analyst published target prices and rate the stock. Of those six, two rate BRK/b a buy and four rate it a hold. Their average 3.67 rating for BRK/b out of a possible 5 is called a moderate buy rating by Barchart.com. Of the 13 momentum indicators tracked by Barchart, 88% are buys.
I don't have that visibility in these markets. So after BRK/b fell about $50 a share Monday, I sold BRK/b 5.9.25 $485 puts for a ARoR of 7.9% on a four-day trade.
Link: https://www.barrons.com/articles/warren-buffett-berkshire-dividend-options-52085ba2?mod=hp_FEEDS_4_WARRENBUFFETT_1
Morningstar.com has an extensive and detailed report on BRK/a, BRK.b. https://www.morningstar.com/company-reports/1274810-berkshires-diversified-portfolio-and-large-cash-hoard-make-it-a-safe-haven-in-uncertain-markets?listing=0P0000063T&utm_medium=referral&utm_campaign=linkshare&utm_source=link
M* estimates that BRK/b's fair value is $750. It gives the stock two stars out of a possible five stars. Two stars is a sell or hold rating, I think. A one star price fair value estimate is $913,125 per share. A five star FVE is $584,400.
Pre market traders are bidding $522.14 for BRK.b. The ask is $522.70. BRK.b closed Friday at $539.80.
Six Wall Street analysts published price targets on BRK.b. The high target price is $606.00. The mean target price is $533.25. The low target price is $470.00. Their average rating is about a hold at 3.67. Four of the analysts rate BRK.b as a buy and two rate it a hold.
Berkshire Hathaway’s Warren Buffett is famous for having a near photographic memory and the skills and talents needed to use the markets’ history to make a lot of good stock and options trades and a few bad ones.
It is one thing to remember history. Learning from history is an art and skill. Few investors have Warren Buffett's memory and know what to do with inside information when they have it.
There is no question that artificial intelligence agents that quickly survey the literature and history of any topic that an experienced prompt engineer or other researcher asks about can compete with Trump's memory. Replicating his wisdom and helping people use the history to make business and life decisions is another issue.
Berkshire has outstanding portfolio managers who have worked for Buffett for years. They may be able to use AI plus their personal skills to make good trades and investments for Berkshire (BRK/a, BRK/b). Time will tell.
But remember that Buffett is one of the best financial PR flacks in the world. He knows how to sell his stock and himself while not telling investors what they really need to know about investing in him and his highly diversified conglomerate..
The stock usually moves with the S&P 500, which is why Buffett recommends buying the exchange traded fund, SPY. When he says own SPY, I think, he really is saying Berkshire. I don't own Berkshire, but I may sell some cash secured puts on the stock.
Thank you for this interesting informaton and the trade strategy.