berkshire hathaway options?

[MTE]

Just for the fun of it, I used a CBOE calculator to price an 85,000 call and put on class A shares with 30 days to expiry and 40% vol:

Call 4,508
Put 3,370

AAPL, which is a $90 stock has a bid-ask spread of around 0.10 on ATM options. So that means, the bid-ask spread on BRK options would be around 100, assuming the same level of liquidity in them as in AAPL options.

 

[dagnyt]

Quote from pinthestrike:

The correct answer is simply that Buffett prohibits their introduction.

Mr Buffet has nothing to say about it.
The options exchanges neither require nor seek permission from the companies when new options are listed for trading.

This stock does not meet the minimum requirements for having its options listed for trading. Volume is far too small.

Mark

 

[pinthestrike]

Quote from dagnyt:

Mr Buffet has nothing to say about it.
The options exchanges neither require nor seek permission from the companies when new options are listed for trading.

This stock does not meet the minimum requirements for having its options listed for trading. Volume is far too small.

Mark

I was at the shareholders' meeting in Omaha in 1999 when he addressed it publically. He is under the impression he has something to say about it. The discussion was related to splitting the stock and the introduction of the class B shares a few years earlier.

 

[dagnyt]

Quote from pinthestrike:

I was at the shareholders' meeting in Omaha in 1999 when he addressed it publically. He is under the impression he has something to say about it. The discussion was related to splitting the stock and the introduction of the class B shares a few years earlier.

If the shares are split 1000 for one, the price will be low enough to increase daily trading volume to the point that the option exchanges will be able to list options for trading.

To the extent that Buffet doesn't allow the shares to split, he does prevent the exchanges from trading Berkshire options.

Mark

 

[overspool]

Quote from JJacksET4:

Well, first of all, Class A shares cost $80000+. That would make premiums quite large for almost all investors.

The real reason I would assume is volume and liquidity. Class A today traded about 600 shares according to yahoo. I don't know of any company that has options that trades that little. Class B only traded about 20000 shares. That still isn't really enough.

I just noticed that Class B normally trades a few million shares. I think the number I'm currently seeing on Yahoo for volume is wrong. So, if there are a few million shares traded daily and with the stock around $2800, it would be possible for options to trade on it maybe. Not sure specifically what the reason would be then. I guess if enough people requested them, eventually they could be done.

Not saying it couldn't be done, but where is the incentive for the exhanges, etc. if they would be lucky to have 1 or 5 volume for an entire series in a day even if it was done? Also, my guess would be even if there were options, even in Class B, the bid/ask spreads would be terrible.

JJacksET4

B shares volume is 20-40k a day average.

 

[JJacksET4]

Quote from overspool:

B shares volume is 20-40k a day average.

That's what I thought at first, but then I looked at the historical quotes pages on Yahoo and it shows about 2-5 million shares traded daily. Just goes to show you can't trust one source. Yahoo seems to show the daily volume correct in the summary page, but the historial prices shows it wrong (and the Ave Daily Volume in the summary page as well).

JJacksET4