cannot believe that buffet sold a complex option ...

[mind]

it is impossible to determine whether that was a great
trade or not if you don't have the deal specifics and thus
can derive whether the options was priced accurately.

just because it sounds like a good trade means zero
nothing nill. that is what these options are all about:
hide some factual, out of current market derived probs
under some astonishingly sounding umbrella.

my point is that WB made his money in a very different
way and always criticized complex derivatives. now he
is selling exactly such an option and i dare say that you
really have to be careful with these options. a friend of
mine created one, that had a very hidden feature, that
would have made the other guy owe you an infinite
amount of money at about 5% probability. not easy to
see at the surface. i am trying to say that selling such
an option is risky by itself. plus it is very long term and
you run a lot of counterparty risk. plus it was a quite
significant bet. plus. plus. plus. all these add up to
question WBs judgement.

 

[mind]

Quote from Random.Capital:

The billions in premium is one of the few actual facts we have on this deal.

you'd better know the game very, very well to get into
this playground. many have burnt the fingers up to
their shoulders in these great trades ... it is not an easy
thing to detect the weak spots in such structures. from
what i know you have many accurately priced issues
in there and one that is heavily overpriced, providing
the structurer's profit.

 

[marketsurfer]

why not?

much of buffett stuff is a myth, anyway.

the house thing always cracks me up--the guy has several estates around the world ( as he should ) however the average guy act is getting old!!

surf

 

[turkeyneck]

Quote from mind:

does not sound at all
like the person i used to see in him.

I don't think he uses a cell phone either.

 

[sellvol]

Quote from KrispyKreme50:

The other posters are right. Considering how these options are also European options (can only exercise at expiration), the buyers for these options are basically betting that we'll still be where are today close to a decade from now. As the other posters have said, factoring in inflation and the opportunity cost, the people who bought these options are probably on the wrong side of the trade.

What makes you think they are going to sit on their hands and pray that their position is positive in 2019? Whoever bet against Buffett is up huge on vol and deltas and is likely locking in profits as we speak while Buffett eats shit. LOL

I know hindsight is 20/20 but his trade was a train wreck. Do not think differently even for a moment.

 

[thegazelle]

What is so complex about selling an SPX put, other than the fact that its a non-standard expiration.

 

[lemeeeplay]

Only an idiot would buy a 13 year option, especially at these volatility levels.

 

[stock777]

you idiots can't even do basic research.

nothing said here makes a bit of sense.

fwiw , Buffet has more brains in his earlobe than the lot of you have in your heads.

 

[Random.Capital]

Quote from mind:

you'd better know the game very, very well to get into this playground.

100% agree. Also agree that it is a very strange bet for Mr. Financial Weapons of Mass Destruction to make. That it expires long after he will be dead is also...curious.

 

[Random.Capital]

Could the timing of this have been any better?

Mon Nov 24, 2008 6:14pm

NEW YORK (Reuters) - Warren Buffett will provide more information on how his company Berkshire Hathaway Inc computes losses on derivatives, after the U.S. Securities and Exchange Commission asked for better disclosure.

The billionaire investor will provide the improved disclosure in his annual letter to Berkshire shareholders, his assistant Jackie Wilson said. Buffett is expected to issue the letter to shareholders around the end of February.