2024 Q4 and Annual Report

[villainx]

Feels more like - or a large part of it is that - BRK has permission to keep their holding if % goes up with the Japanese companies respective buybacks.

 

 

[coc]

On 2/23/2025 at 9:29 AM, 73 Reds said:

The "psychological" issue I always had with covered calls is that you are betting against yourself in a way.  If you manage the options you can probably generate a consistent, positive return - particularly on a reliably profitable stock like Berkshire.  As I've written before you can also win a bet with anyone who doesn't believe you can best the S&P 500 index (and most professional money managers) by writing OTM covered calls against the index and rolling them forward in the event you risk losing your underlying position to assignment.  But you're right - time is better spent on other endeavors. 

 

How would shorting calls guarantee outperformance? You might sell a call for $5 and then have to buy it back for $10 in order to roll it. The options market is efficient.

[73 Reds]

6 minutes ago, coc said:

 

How would shorting calls guarantee outperformance? You might sell a call for $5 and then have to buy it back for $10 in order to roll it. The options market is efficient.

If you look back in history, how much has the index risen in any given period of time?  When you sell OTM calls, they either expire worthless or you are forced to roll them forward in order to avoid assignment.  Unlike individual stocks, the index is not going to rise 20, 50 or 100% on any given day or week because of news of a buyout, new technology or a life altering product.  The index price rises gradually because it is composed of what is essentially the whole economy.  If you are in jeopardy of losing your underlying position before the calls expire, you can roll them forward at a higher price.  Unless you believe the index price will rise quickly and forever, you're not going to lose money or your underlying position.  That doesn't mean you'll necessarily make a whole lot either; the issue was can anyone with a fourth grade education beat the index and thereby best most money managers.  The answer is yes.

[coc]

5 minutes ago, 73 Reds said:

If you look back in history, how much has the index risen in any given period of time?  When you sell OTM calls, they either expire worthless or you are forced to roll them forward in order to avoid assignment.  Unlike individual stocks, the index is not going to rise 20, 50 or 100% on any given day or week because of news of a buyout, new technology or a life altering product.  The index price rises gradually because it is composed of what is essentially the whole economy.  If you are in jeopardy of losing your underlying position before the calls expire, you can roll them forward at a higher price.  Unless you believe the index price will rise quickly and forever, you're not going to lose money or your underlying position.  That doesn't mean you'll necessarily make a whole lot either; the issue was can anyone with a fourth grade education beat the index and thereby best most money managers.  The answer is yes.

 

And how do you know the money you lose rolling your positions won't offset the pennies you're collecting along the way? Do you have any data on this?

 

And if you don't roll your position, you might lose it, and lose that upside, then have to buy back at a higher price. Which will also cost you versus the index.

 

Therefore there is no free lunch and unless you can prove it with data, no guaranteed outperformance by "anyone with a fourth grade education".

Edited Wednesday at 06:14 PM by coc

[73 Reds]

Just now, coc said:

 

And how do you know the money you lose rolling your positions won't offset the pennies you're collecting along the way? Do you have any data on this?

You don't "lose "money rolling the position.  You repurchase the call you sold earlier and sell an OTM call that expires at a later date for the same or more premium that you paid for the repurchase.  It is entirely up to you how far OTM and how long dated these options are.  Obviously, the further out of the money they are, the smaller the premium but the index is not going from 6,000 to 7000 overnight so you have plenty of time and opportunity to manage the position.

[coc]

28 minutes ago, 73 Reds said:

You don't "lose "money rolling the position.  You repurchase the call you sold earlier and sell an OTM call that expires at a later date for the same or more premium that you paid for the repurchase.  It is entirely up to you how far OTM and how long dated these options are.  Obviously, the further out of the money they are, the smaller the premium but the index is not going from 6,000 to 7000 overnight so you have plenty of time and opportunity to manage the position.

 

I've read some nonsense on this board but this might be the worst. If I sell a $3 call and buy it back for $6, I've lost $3!! The next transaction is completely independent, a new P/L. So the question remains, how can you "guarantee" I will make money net of these potential rolling losses? Your strategy would have been exploited long ago by hedge funds if it were valid. 

 

Let's do an example for others who might be reading and potentially pursuing this (bad) advice:

 

Today a 12/31/25 call on the SPY at 700 goes for $3.22 according to my broker. Absolute peanuts by the way, 0.5%. But if the index goes to 650 by midyear, the call will trade up and I'll have to buy it back higher to continue to stay the same distance out of the money. (Or I get closer and closer to losing my position, which this fella says you don't want to do.)

 

So I sell it for $3.22, buy it for, say, $6.44, then sell a new one at 750 for 6/30/26 for $3.22. Where is my extra profit?  

 

This whole strategy is not only not "guaranteed" to make money, it runs a risk of losing you some money, unless you can predict the market, in which case you should be buying options.

 

Edited Wednesday at 06:45 PM by coc

[73 Reds]

1 hour ago, coc said:

 

I've read some nonsense on this board but this might be the worst. If I sell a $3 call and buy it back for $6, I've lost $3!! The next transaction is completely independent, a new P/L. So the question remains, how can you "guarantee" I will make money net of these potential rolling losses? Your strategy would have been exploited long ago by hedge funds if it were valid. 

 

Let's do an example for others who might be reading and potentially pursuing this (bad) advice:

 

Today a 12/31/25 call on the SPY at 700 goes for $3.22 according to my broker. Absolute peanuts by the way, 0.5%. But if the index goes to 650 by midyear, the call will trade up and I'll have to buy it back higher to continue to stay the same distance out of the money. (Or I get closer and closer to losing my position, which this fella says you don't want to do.)

 

So I sell it for $3.22, buy it for, say, $6.44, then sell a new one at 750 for 6/30/26 for $3.22. Where is my extra profit?  

 

This whole strategy is not only not "guaranteed" to make money, it runs a risk of losing you some money, unless you can predict the market, in which case you should be buying options.

 

No.  I'm not sure I can explain it any better.  The point is not to make as much money as you can - selling options would be the wrong strategy.  The point is to BEAT THE INDEX.  For the sake of argument it doesn't matter by how much.  And it doesn't guarantee profits - the index loses money over varying periods and if you own it, so will you.  If you would like to DM me, I'd be happy to wager a bet (you pick the amount, start date and time period (should be at least 6 months, preferably a year because very short term anything can happen) and winnings are donated to charity of winner's choice.  My guess is, it won't take more than 60 minutes over the course of the entire duration to manage the options and best the index.   I'd prefer to use "paper money" for purposes of the trades (which can be made and documented in real time) since I don't think the index is a particularly good holding today.   

[Munger_Disciple]

1 hour ago, coc said:

And if you don't roll your position, you might lose it, and lose that upside, then have to buy back at a higher price. Which will also cost you versus the index.

 

Therefore there is no free lunch and unless you can prove it with data, no guaranteed outperformance by "anyone with a fourth grade education".

 

And if your position gets called away, you pay the capital gains tax you were not planning on paying. I agree  there is no free lunch. Anyone who thinks that there is in writing covered calls is delusional. 

 

Another way to looking at covered calls is that you are keeping all the downside and selling all the upside, for teeny bit of premium. 

[73 Reds]

28 minutes ago, Munger_Disciple said:

 

And if your position gets called away, you pay the capital gains tax you were not planning on paying. I agree  there is no free lunch. Anyone who thinks that there is in writing covered calls is delusional. 

 

Another way to looking at covered calls is that you are keeping all the downside and selling all the upside, for teeny bit of premium. 

I'll make you the same offer.  Mind you, the bet could be won in a matter of days.

[John Hjorth]

After reading the latest exchange here in this topic - which I certainly appreciate, thank you, I simply can't help to ask this question to Mike [ @boilermaker75 ], for perspective :

 

Are you in any of the Berkshire puts by now, and what is your perspective here, by now?

 

[Maybe not a fair question from my side, but then again, I know you know you have the absolute freedom, to reply in what ever way that you may see fit, despite how the question is asked -  - Thank you in advance.]

[LC]

Isn't this just a bet on volatility? 

 

And I don't see how betting on whether it works or not is relevant - if the strategy can't be clearly explained, what does that say?

Edited Wednesday at 09:00 PM by LC

[backtothebeach]

There is no free lunch. Even selling puts (which I have done a lot of as well), is largely bullshitting oneself. But it is entertaining, and successful most of the time.

Edited Wednesday at 09:02 PM by backtothebeach

[73 Reds]

Just now, backtothebeach said:

There is no free lunch. Even selling puts (which I have done a lot of as well), is largely bullshitting oneself. But it is entertaining, and successful most of the time.

The strategy won't work with short puts because if you don't hold the underlying you lose the dividends and have a higher threshold.

[Munger_Disciple]

Just now, backtothebeach said:

There is no free lunch. Even selling puts (which I have done a lot of as well), is largely bullshitting oneself. But it is entertaining, and successful most of the time.

 

It's called picking up pennies in front of a steamroller. Many went bankrupt overdoing it. Here is one:

 

https://en.wikipedia.org/wiki/Victor_Niederhoffer

[Munger_Disciple]

3 minutes ago, 73 Reds said:

The strategy won't work with short puts because if you don't hold the underlying you lose the dividends and have a higher threshold.

 

This post might be worse than your previous posts on option trading. It actually proves you don't understand options. 

Edited Wednesday at 09:08 PM by Munger_Disciple

[73 Reds]

1 minute ago, Munger_Disciple said:

 

It's called picking up pennies in front of a steamroller. Many went bankrupt overdoing it. Here is one:

 

https://en.wikipedia.org/wiki/Victor_Niederhoffer

Perhaps.  But pennies add up.  And the point is, beating the index is a ridiculous standard for any professional money manager.  After Buffett, Jack Bogle is second to none.

[73 Reds]

1 minute ago, Munger_Disciple said:

 

You clearly don't understand options.

OK, then accept my bet.

Edited Wednesday at 09:08 PM by 73 Reds
spelling

[Munger_Disciple]

Just now, 73 Reds said:

OK, then accept my bet.

 

I don't want to use foul language here and keep the discussion polite. But I have to admit it is getting harder so I will refrain from making any more comments on your option trading. 

[73 Reds]

Just now, Munger_Disciple said:

 

I don't want to use foul language here and keep the discussion polite. But I have to admit it is getting harder so I will refrain from making any more comments on your option trading. 

If I've insulted you or anyone it is not my intention and I try to keep every conversation civil and polite.  Hope you didn't take it differently.

[coc]

1 hour ago, 73 Reds said:

No.  I'm not sure I can explain it any better.  The point is not to make as much money as you can - selling options would be the wrong strategy.  The point is to BEAT THE INDEX.  For the sake of argument it doesn't matter by how much.  And it doesn't guarantee profits - the index loses money over varying periods and if you own it, so will you.  If you would like to DM me, I'd be happy to wager a bet (you pick the amount, start date and time period (should be at least 6 months, preferably a year because very short term anything can happen) and winnings are donated to charity of winner's choice.  My guess is, it won't take more than 60 minutes over the course of the entire duration to manage the options and best the index.   I'd prefer to use "paper money" for purposes of the trades (which can be made and documented in real time) since I don't think the index is a particularly good holding today.   

 

NO. No. Jesus. You don't get it at all and you're resorting to sophistry like "make as much money as you can" or "guarantee profits" which nobody has claimed. You're saying your strategy will *add profits to your index investing GUARANTEED* and you are 100% wrong. It MIGHT, or it might SUBTRACT from your profit/loss, maybe meaningfully. *Over time* the moves in the tails will eat you alive as you try to trade these things. And you may not see your failure come up in "six months" or "a matter of days" as you challenged someone else above. There will be single days in which this strategy bests you over a 10,000 day period.

 

Please God do not trade options or recommend others do so. You may be the world's best stock investor but you're clueless on this topic. I just don't know how else to put it. I can tell 100% you have not actually pursued this strategy over a period of many years (at least a full cycle) because succeeding in it would require you to be an EXCELLENT option trader and know options intimately. 

 

As for being civil, I tried starting with that but you've proven that you're going to continue to promote a bad idea you don't understand to people who might pursue it, so I have resorted to being pointed. I am now finished responding on this and I hope anyone following this exchange can understand why this is not a good idea, there is no such thing as guaranteed additional profits, etc. 

Edited Wednesday at 09:24 PM by coc

[73 Reds]

1 minute ago, coc said:

 

NO. No. Jesus. No. You don't get it at all and you're resorting to sophistry like "make as much money as you can" or "guarantee profits" which nobody has claimed. You're saying you guarantee your strategy will *add profits to your index investing GUARANTEED* and you are 100% wrong. OVER TIME the moves in the tails will eat you alive as you try to trade these things. And you may not see your failure come up in "six months" or "a matter of days" as you challenged someone else above. There will be single days in which this strategy bests you over a 10,000 day period.

 

Please God do not trade options or recommend others do so. You may be the world's best stock investor but you're clueless on this topic. I just don't know how else to put it. I can tell 100% you have not actually pursued this strategy over a period of many years (at least a full cycle) because succeeding in it would require you to be an EXCELLENT option trader and know options intimately. 

Sorry to disagree.  Over the course of time you can pick your spots.  Other times you do nothing but continue to hold the index.  I think you're making this far more complicated than it has to be; at this point we're beating a dead horse but I'll be glad to put some real money to the test - for charity of course.

[coc]

Another way to understand the idiocy of 73 Red's idea is that buyers in the SPY options market are guaranteed to cede some money to you net, if you just pursue his strategy! Must be a lot of dummies out there! 

[DooDiligence]

39 minutes ago, Munger_Disciple said:

 

I don't want to use foul language here and keep the discussion polite. But I have to admit it is getting harder so I will refrain from making any more comments on your option trading. 

 

One of the worst debate tactics is "Winning at all costs". I can't see the other dude's posts because I've blocked him/her/it, but I'd say you will never win this debate except in the minds of rational individuals with actual integrity. I say you win.

[Munger_Disciple]

8 minutes ago, DooDiligence said:

 

One of the worst debate tactics is "Winning at all costs". I can't see the other dude's posts because I've blocked him/her/it, but I'd say you will never win this debate except in the minds of rational individuals with actual integrity. I say you win.

 

Thanks @DooDiligence! Can you please tell me how to block a poster so that I can follow your lead?

Edited Wednesday at 10:00 PM by Munger_Disciple

[DooDiligence]

Just now, Munger_Disciple said:

 

Thanks @DooDiligence! Can you please tell me how to block a poster so that I can follow you?

 

Roll over their profile on the left of a post and you'll get a popup. The option is there. The pun was inadvertent but kinda works.