(BRK.A) (BRK.B) – Berkshire Hathaway Inc. – Shares of the holding company, which owns subsidiaries engaged in diverse business activities such as property and casualty insurance and reinsurance, slipped slightly lower by 0.30% to stand at $79.29 just before 11:30 am (ET). Bearish options activity on the stock today suggests at least one investor is bracing for continued erosion in the price of the underlying shares through August expiration. The put player appears to have purchased approximately 1,300 puts at the August $75 strike for an average premium of $2.14 apiece, spread against the sale of 2,600 puts at the lower August $70 strike for an average premium of $1.03 each. The average net cost of the ratio spread amounts to just $0.08 per contract. The transaction prepares the responsible party to make money should Berkshire’s shares decline 5.5% from the current price to breach the effective breakeven point to the downside at $74.92 ahead of expiration day in August. Maximum potential profits of $4.92 per contract are available to the put spreader if shares of the underlying stock plummet 11.7% to settle at $70.00 at expiration.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.
Visit: Interactive Brokers