For those looking for ideas, with brk trading at this valuation, I sold calls. You can sell the 335 or higher, go out 1-2 months, or longer. brk options are not liquid and trade with fairly large spreads. Thats one advantage of being long spy, the option liquidity is far superior. Selling puts on large sell offs and selling calls on big rallies, can work over time. Old timers here recall my posts about selling brk options before the split. Good luck.
I am selling covered calls beginning in Jan 2024, strike $410+.
Basically this is my dividend.
Hopefully in a year , those calls are near in the money. Good luck.
What’s the point of making 2% per year, which is like one day of stock movement, at the cost of giving up the chance of winning a lottery like return when the stock doubles. Isn’t the whole point of buying stock instead of bond is because of the unlimited upside?
I thought about this a lot. Never sold a call.
In fact, there’s no point of dealing with options. If you pick the right stocks and buy it you will be rich. Options you have to be right on the 2nd dimension, the timing .
Good morning, if he goes out a year, 35 percent or so out of the money, he may have a good use for 4000$$ per 1000 Bs owned. He can always buy the calls back if he changes his thinking. I prefer to go out 2 -3 months but, with brkb getting filled is a problem, hence he avoids that issue by selling calls once a year. The market makers can only trade around his order once, I’m much more vulnerable. Take care.
For 1000 shares of Brkb, you are risking $350k of shares you have for $4000. What happen if something happens to the market and stock goes up 35%, you shares could get called away before you had a chance to buy back those calls for 10x of $4000. If you don’t, you would face a large capital gain tax bill for the shares that got called away.
Forget about it. Just sit on it and find another way to make that $4000
Thanks, I think it’s fair to say, writing covered calls is not for you.
Different strokes for different people. Last year, I just managed to eek out a small positive gain by short-term trading and selling options.
If you know how to pick right stocks, which is not an easy as it sounds, then you are rich. For those, who don’t know, and have to accept what market deals, you develop some strategies to goose the returns. Like everything else, there is risk associated with it, the stock could go much higher than your covered call or go much lower than your put. You live with that.
I have been selling naked puts and covered calls since Buffet made his famous index put trade. I have been doing this for about 10 years. On the put side I have only had one expire in the money. I had some $30 puts in DB (Deutsch Bank). Currently around $11. I had the options exercised and immediately sold for a small loss. I focus on large market cap hopefully lower volume equities. Currently BRKB, BAC, WFC, OXY, C, JPM, AAPL. They should all expire worthless in 2 weeks. On the covered call front I have over 30 positions currently that all will expire in 2 weeks as well. I have had some BRKB exercised in the past, and I was always to buy it back for less within 90 days. I am getting pushed on 1 position. I wold $205 BA calls for $15 expiring Jan 2024 when it was much lower. Now in the money and likely to exercise. My net is $220 and the stock just reached $213. I id recently purchase some back a trading profit. $330 BRKB Calls for Jan 2023. BA $205 Jan 2023 calls that I rolled forward. My estimate is that I made over 1.5% of my portfolio last year on the call & put positions. For BRKB I sell the farthest out lowest price puts available. I have $125 expiring in jan 2023, plus $140 puts for 2024 & 2025.
I have dabbled into TSLA calls sold naked a few years ago (small profit). I have covered calls on BRKB, CVX, OXY, MSFT, GOOGL, JPM, PCG, AAPL, BA, C, DHR. The are mostly done in IRA’s. In 2 weeks I hope to have a nice relaxing weekend.
The Jan 2024 BRK-B $140 put last sold for $0.75. When you sell the put in a retirement account, you need to keep money available to cover the put if exercised (correct?). So your $14K has a return of $75 per year (about), or roughly 5.4%. Up to each person to decide if that’s a good use of their money.
Good point. I only sell naked puts in a traditional account.
For 2023 $125 puts I got $1.70
For 2024 $140 Put $3.67
For 2025 $140 Put $3.05
I anticipate $20 to $30 BB in annual retained earnings as I hold.
Sold C $40 puts for $2.22
JPM $95 puts for $3.76
Oxy $40 puts for $1.67
WFC $32.5 for $1.21
BAC $30 puts for $1.41
BAC June $25 for $1.43
AAPL $105 for $4.50
I try to stay at least 30% out of the money to the down side.
I will add that I am a bit of trigger finger trader. So selling covered call in an IRA forces me to hold on and not trade in and out.
This isn’t entirely accurate. If you don’t want to pay the large capital gains tax, you can simply buy another 1000 shares and deliver those instead.
I sold some BRKA 300 Jan puts a week or two ago in an attempt to buy some shares at ~296. I was fully expecting the drop to continue to 300 or below and then be assigned at 300. So far that hasn’t happened and there’s only 2 weeks remaining for those options. That’s the danger of using puts as a way to get a discount on the stock price … sometimes you get just the discount and don’t get the stock.
Puts sold in an Ira, must be 100 percent cash secured. Puts sold in a regular account on margin or over writing calls, is a great way to suffer serious financial damage, or worse.
Understood, but I am not that aggressive. Even if my equity declined in half triggering the puts, I would still be about 60 to 70% equity in the account. Of course my IRA’s are not exposed in this way. They are more than half of my total equity. So the puts would trigger about 10% of my total equity if exercised. I am just selling time. I plan to spread them out over many strike prices and expiration dates going forward. When in doubt I always except less premium for a lower put price. I am not trying to optimize income.
while generally true, you don’t have to wait until expiry, for ex: I have sold 10 puts on 11/09 Jan 24, $200 BRKB puts for $4.5, I closed 8 of them for $2.25. It is important to take profits, or close them if they don’t go as per your expectations. Similarly on my covered call’s also, opportunistically I close them. This way, I make sure my margin is managed and all this short-term gains allow me to take any losses or rotate any covered calls that appreciated. I have successfully (lucky you can say) have written covered calls on my REIT’s, and generally realized 10% to 15% return including dividends excluding cap gains. I am okay with that.
If that works for you that’s great. I much prefer the spy because the spreads are tight and the options are liquid. I assume , in general, you enter your brk options in the, middle of the spread and hope to get filled?
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