Sell Puts When You Can

JC Parets
July 25, 2024

The Volatility Index almost hit 20 this week.

That means there are opportunities to generate income that simply were not there before.

"Get while the getting is good", is how I learned it.

A month ago you weren't getting paid to sell volatility.

This week you are.

Take a look at Berkshire Hathaway, which represents the largest component of the S&P Financials Index:

Berkshire is not only the largest component of the Financials Index (13%), but just to put things in perspective, its weighting represents more than JP Morgan (10%) and Goldman Sachs (2.5%) Combined.

Despite all that, when you see what's inside Berkshire, you'll find a lot of Industrials as well.

Also keep in mind that 20% of Berkshire is just Apple alone, so you're getting a lot of that in there too.

Berkshire's cash positions are also in the high teens, which is typical for Uncle Warren and friends.

In fact, you can tell the pessimists that Berkshire's cash position is less than half of what it was 20 years ago when it was 40% cash.

Warren is in. And it shows in the stock.

Something we do quite often around here is sell naked puts in Berkshire when people get scared and volatility spikes.

This time we actually took that cash and used that to buy call options in BRKB.

So not only are we betting that Berkshire stops going down (selling puts), we are simultaneously betting that Berkshire stock goes up (buying calls).

We don't always buy the calls. We usually just collect the cash.

But this time we sold the puts AND bought the calls.

Click here to get access to all the details.

Do you like this trade as much as I do.

JC

 

Filed Under: