Well, I’m back to the party. Just added some B’s @ $263.98. My first purchase since 3/18/2020, when I bought @ $174.56. I’d happily take more.
jg
For the really dark side of the force, I’m considering putting some of my “fun money” pot into out-of-the-money call options.
i.e., the really dumb risky kind where you lose all your money if the stock price merely stays where it is.
I think I’ve only done that once before.
Jim
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“History doesn’t repeat but it rhymes”.
I’m expecting an extended period of trading sideways and a slow drip drip down and the compression of multiples (PE ratios) much like the 1970’s the more I think about the situation and look at the history.
Thoughts?
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I too took another bite again today as well. 100 point drop in under 3 months and P/B now 1.16. Mr. bipolar Market is serving us nicely with a fatigued arm fast ball right over the plate. Fun to be able to swing again down here!
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Anybody knows when the Mid-2024 BRK calls will be available?
(I have a lot of Jan’24s but am much more interested in expiring later ones.)
Anybody knows when the Mid-2024 BRK calls will be available?
(I have a lot of Jan’24s but am much more interested in expiring later ones.)
Shoudl be imminent.
Some of them have already started trading, e.g. BAC.
Jim
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Anybody knows when the Mid-2024 BRK calls will be available?
(I have a lot of Jan’24s but am much more interested in expiring later ones.)
FWIW, this might be one of those moments not to worry too much about the expiry date.
If you wait till the price is a bit higher before rolling them out, you’ll be much better off.
Assuming that rolling them out is what you wanted to do, and that the price will be higher some day.
Two things make time value expensive for any given in-the-money option contract:
A relatively panicky day in the markets, and a low price for the stock.
Rolling an option means you’re a net buyer of time value, so this is an inauspicious week to be doing that.
Ideally you want to roll out (and maybe up) on days that the market is calm and the stock price is high.
A quite separate thing is when you want to buy more of something.
For that, quite obviously you want a low price : )
Jim
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Assuming that rolling them out is what you wanted to do
No, it’s about continuing to buy if the price continues to go down. As I want to buy the ones with the farest/furthest/most out (? I just reached the limits of my English language knowledge) expiry date I ask to avoid for example next week buying Jan’24s if let’s say a few days later Jul’24s would be available.
I’m considering putting some of my “fun money” pot into out-of-the-money call options.
i.e., the really dumb risky kind where you lose all your money if the stock price merely stays where it is.
How about buying call and selling put at the same time? If the price stays low (or goes higher), the buying and selling cancel out each other somewhere and you may also buy some shares at low price.
I tweaked my portfolio today selling a few things I’d grown less enthused about their long term prospects, and added to BRK B at $267-268.
For the really dark side of the force, I’m considering putting some of my “fun money” pot into out-of-the-money call options.
I bought some of those this morning for the first time ever. Just for fun mind you.
Jeff
For the really dark side of the force, I’m considering putting some of my “fun money” pot into out-of-the-money call options.
…
I bought some of those this morning for the first time ever. Just for fun mind you.
Hot tip for maximizing fun:
The first day they go into the money…when the stock price rises to the strike…
sell them and buy stock or lower strike calls.
That locks in the maximum profit on the time value and drops the breakeven by a mile.
Or, well, just take a quick profit…that’s not always so bad : )
Jim
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Just because I’m trying to learn this option game, would one be looking at Jan 24 calls @$300 or much cheaper calls near the ATH?
PP
For the really dark side of the force, I’m considering putting some of my “fun money” pot into out-of-the-money call options.
i.e., the really dumb risky kind where you lose all your money if the stock price merely stays where it is.
I’ve been buying sanely … so why not add a little insanity?
Wondering what strike/expiration was tickling your dark side?
How about buying call and selling put at the same time? If the price stays low (or goes higher), the buying and selling cancel out each other somewhere and you may also buy some shares at low price.
You don’t specify strike and expiry, but buying a call and selling a put at the same strike and expiry is conceptually the same as buying a future, which is the same as being long BRK stock plus an interest rate premium as part of the future price. So this is the same as just buying BRK stock, except with the leverage of a future. The interest rate premium in the future price is your cost of borrowing for the leverage.
buying a call and selling a put at the same strike and expiry is conceptually the same as buying a future, which is the same as being long BRK stock plus an interest rate premium as part of the future price. So this is the same as just buying BRK stock, except with the leverage of a future. The interest rate premium in the future price is your cost of borrowing for the leverage.
Thanks. That’s what I meant. At strike 270, the June 2023 call is priced at 28, the same date put is 23. So no matter how the stock price moves, you will end up buying the stock at 270 on June 2023 with a premium of $5. Comparing to buying it at 270 now, that’s a interest rate of 5/270=1.85%
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I’ve been buying sanely … so why not add a little insanity?
Wondering what strike/expiration was tickling your dark side?
Not recommended, but since you ask, it was Jan 2023 $280.
I didn’t put a lot of deep thought into it, it was an entertainment trade.
Normally I like long dated picks, but I didn’t this time because time value is very expensive right now and a price bounce is a reasonable expectation.
In combination those factors suggest I can probably roll them (get that extra date to expiry) at a much cheaper price some time later.
In the same sense that one wants to buy stocks or hamburgers when they’re cheap, I like to buy option time value when it’s cheap.
Ideal would be to roll them down the first time the stock price is $280, which will lock in the
maximum profit on the time value and cause the breakeven price to fall a lot.
Depends how much spare cash you have and when. Clearly you get a much better entry buying the stock on a dip than you do buying calls on a dip.
The percentage rate of return on the calls might be higher in the case of a bounce, which is why it’s fun for the fun money section of the portfolio.
Looked at with rose coloured glasses:
The premium was a little under $15 so the breakeven is a little under $295 per B share.
That’s terrible compared to the price at the time of a little under $265, but hey, that’s lower than the stock price just two weeks ago, which we (well, I) considered very attractive.
So, control of a lot of dollars worth of stock for not much money, and a very modest maximum downside.
Jim
6 Likes
Not recommended, but since you ask, it was Jan 2023 $280.
I didn’t put a lot of deep thought into it, it was an entertainment trade.
Would this trade make more sense in a cash or IRA account?
Would you indulge this options newbie with some greater specifics…
The BRK.B Jan '23 call option @ $300 is $10.90. As, I understand that, the option is priced per share. So if the price of BRK.B goes from it’s current $275 to, say, $285 in the next week or two, would we expect the value of the option to go up (very roughly) $10 (per share)? Roughly a 100% gain?
Do you have any sense on how the increase in stock price moves with the underlying option value? Is it a $1 for $1 or does it vary?
Thanks in advance for indulging my ignorance.
Interesting. Not just out of the money, but fairly short term too (less than 6 months). I’m partial to the January '24 $300 calls. Some reasonable expectations would have them doubling before expiration, and it only needs to reach prices already seen in the last 365 days to get there.
It wouldn’t be proper for me to recommend them after buying them, but the way I look at the decision is if there is a reasonable expectation of a large gain, then it can be a situation where the large gain provides a gain to lifestyle, but a loss doesn’t affect lifestyle (say, money in a retirement account you aren’t withdrawing from yet).