Berkshire share price held very strong. The balance sheet is rock solid. So, opened a deep in the money covered call, selling $400 Jan 26 call for a net price of $381. This gives 6.87% annualized yield. This gives 28% downside protection.
There is a potential for a recession and it is just hiding some cash and earn slightly higher return than the money market. I may not necessarily hold it till maturity, depending on how things play out, I might close it or roll the strike price.
Did you consider instead selling the 400 put for $7.75 and keeping $40,775 (per contract) in T-bills through January? The annualized yield is about the same, but you get to have all that cash sitting in your account which improves your margin position (naked puts in a margin account don’t fully consume the exercise price in margin). That gives you optionality for other trades, while $38,100 not present in your account does not.
Yes, The 40000 will earn $1161 in interest and add that to $775, it is same as the covered call. When I do the covered call, I use the current interest rate in the premium calculation. I have significant margin capacity and the cash is not going to help me much there. Actually I want to reduce the cash. I have seen the CEO’s with excess cash do diworsification, and I am lot less disciplined and stupid than them.