A Good Time to Be Tactical in Berkshire
Here's the one-year chart of Berkshire Hathaway $BRK.B:
The analyst team loves selling premium here and I can't disagree as vol is coming off the highs, but still elevated:
Here's the Play:
I sold a $BRK.B June 465/425 Bull Put Spread for a $4.81 credit. This means I'm short the 465 puts and long the 425 puts to define my risk:
I'd prefer to sell naked puts, but the margin requirement makes that trade onerous. So, adding the long put to create the spread keeps the margin clerks happy.
We're going after a high probability win here. Nothing fancy.
My risk management is simple: If BRK.B trades below 465 intraday, I'm going to close the trade. Win, lose, or draw, I'm out. My thesis is 465 is the bottom. If the market proves me wrong, I'm wrong and I'm out.
In the meantime, I'll look to close this spread for a profit when I can buy it back for half of what I sold it for today, so -- $2.40 debit.
If you have any questions on this trade, please send them here. Or better yet, hit me up in the ASO chatroom so we can all benefit from the discussion.
If you missed my most recent ASO video Jam Session, you can catch a replay on Stock Market TV.
