I wonder why Warren Buffet doesn't write naked put options to acquire
shares of value stocks, or write covered calls to turn the shares of
his value stocks into a "synthetic ATM"? And if the underlying stock
goes the other way, you've got the premium income to offset your
loss.

Come on, Mr. Buffet, it just takes a couple hours --or a couple
minutes each day-- to read Thomsett's "Options Trading for the
Conservative Investor: Increasing Profits Without Increasing Your
Risk". Writing put options to acquire stock --or writing call options
on shares you already own-- is the most conservative option strategy
ever devised --except possibly a box spread, but we'll leave that to
the quants and floor traders--. You can increase your returns,
decrease your risk, and still follow your value investing strategy.
Write naked put options to buy value stocks at a discount --and get
some current income while at it--, and write covered call options to
turn your value stocks into ATMs --you're basically getting a
synthetic dividend--. Doing that --writing naked puts and covered
calls--, you're not really speculating, you're acting more like an
insurance underwriter, taking a calculated risk to get an income.

And Mr. Buffet, just invest by the fundamentals of the company. Stop
not investing b/c "you don't understand what the company does". I
don't understand the inner workings of many companies I own shares in,
but that doesn't stop me from taking up a good value and making cash
hand over fist. You've really missed out on a LOT of cash. You said
you didn't invest in MSFT b/c you didn't understand it and couldn't
tell where it would be in the next five years. Well, guess what? In
1986, MSFT was trading at $30, and currently, in 2007, it's trading at
around $30. But since 1986, MSFT split it's shares 9x; it's split-
adjusted back in 1986 would've been $0.08, which means $8000 invested
in MSFT back then would be worth over $3MM today!

Is writing OTM put options to acquire shares of value stocks a good,
long term strategy?

And is writing a put option and shorting the underlying equivalent to
writing a naked call option?
Thanks!!!!

On Aug 6, 7:21 pm, DarkProtoman <Protoman2...@gmail.com> wrote:

snip

goes the other way, you've got the premium income to offset your
loss.



Are you stupid? - or simply ignorant about the basics properties of options

On Aug 6, 7:21 pm, DarkProtoman <Protoman2...@gmail.com> wrote:
I wonder why Warren Buffet doesn't write naked put options to acquire
shares of value stocks, or write covered calls to turn the shares of
his value stocks into a "synthetic ATM"? And if the underlying stock
goes the other way, you've got the premium income to offset your
loss.


What a bum. He could've been really really rich, instead of just
really rich.

PeterL <po.n...@gmail.com> wrote in news:1186464732.619803.282750
@x35g2000prf.googlegroups.com:

On Aug 6, 7:21 pm, DarkProtoman <Protoman2...@gmail.com> wrote:
I wonder why Warren Buffet doesn't write naked put options to acquire
shares of value stocks, or write covered calls to turn the shares of
his value stocks into a "synthetic ATM"? And if the underlying stock
goes the other way, you've got the premium income to offset your
loss.

What a bum. He could've been really really rich, instead of just
really rich.

You can't expect Buffet to be as smart as DarkProtoman.

PeterL <po.ning@gmail.com> wrote in news:1186464732.619803.282750
@x35g2000prf.googlegroups.com:

On Aug 6, 7:21 pm, DarkProtoman <Protoman2...@gmail.com> wrote:
I wonder why Warren Buffet doesn't write naked put options to acquire
shares of value stocks, or write covered calls to turn the shares of
his value stocks into a "synthetic ATM"? And if the underlying stock
goes the other way, you've got the premium income to offset your
loss.


What a bum. He could've been really really rich, instead of just
really rich.


You can't expect Buffet to be as smart as DarkProtoman.

in article Xns99856F75BCDDrforschrcn...@69.28.173.184, Dr Tormento at
re...@togroup.com wrote on 8/7/07 1:57 PM:





PeterL <po.n...@gmail.com> wrote in news:1186464732.619803.282750
@x35g2000prf.googlegroups.com:

On Aug 6, 7:21 pm, DarkProtoman <Protoman2...@gmail.com> wrote:
I wonder why Warren Buffet doesn't write naked put options to acquire
shares of value stocks, or write covered calls to turn the shares of
his value stocks into a "synthetic ATM"? And if the underlying stock
goes the other way, you've got the premium income to offset your
loss.

What a bum. He could've been really really rich, instead of just
really rich.

You can't expect Buffet to be as smart as DarkProtoman.

Well, with the size of the positions that Buffett has in publicly traded
stocks, he'd be able to write options on probably much less than 1% of any
holding.....Why bother???
Otherwise, another fantastic idea!!!- Hide quoted text -

- Show quoted text -

On Aug 7, 11:23 am, Blash <bla...@comcast.net> wrote:

Well, with the size of the positions that Buffett has in publicly traded
stocks, he'd be able to write options on probably much less than 1% of any
holding.....Why bother???
Otherwise, another fantastic idea!!!- Hide quoted text -

Do you mean my idea is good, or are you just being facetious --I can't
tell w/ text--.

And what of my strategy of writing OTM put options to acquire shares
of bank stocks --as recommended by Fortune's 06/07 article "Why Banks
Beat Bonds", p.87--, particulary those of US Bancorp --NYSE:USB--, b/c
it has a juicy PEGY of 0.87, indicating it definitely has the earnings
growth and dividend yield --5.15%!!!!-- to back up it's succulent P/E
of 12.00. I'll ten sell OTM covered calls against my shares, reducing
my cost basis and driving up my ROI.

On Aug 7, 3:16 pm, DarkProtoman <Protoman2...@gmail.com> wrote:

On Aug 7, 11:23 am, Blash <bla...@comcast.net> wrote:
Well, with the size of the positions that Buffett has in publicly traded
stocks, he'd be able to write options on probably much less than 1% of any
holding.....Why bother???
Otherwise, another fantastic idea!!!- Hide quoted text -
Do you mean my idea is good, or are you just being facetious --I can't
tell w/ text--.

Blash has a point that options are traded in such small amounts as to
make it difficult for a large scale investor to participate. IIRC,
there are exchange limitations on the number of options that can be
sold.

And what of my strategy of writing OTM put options to acquire shares
of bank stocks --as recommended by Fortune's 06/07 article "Why Banks
Beat Bonds", p.87--, particulary those of US Bancorp --NYSE:USB--, b/c
it has a juicy PEGY of 0.87, indicating it definitely has the earnings
growth and dividend yield --5.15%!!!!-- to back up it's succulent P/E
of 12.00. I'll ten sell OTM covered calls against my shares, reducing
my cost basis and driving up my ROI.

With much of the debt owned by banks being risky, it may not be a good
strategy since you could end up holding bank stock at depressed
prices.

At the current USB option prices, it would be better to buy the stock
and write covered calls than to write puts. And, the high dividends
are an added benefit.

--
Ron