Discussion in 'Options' started by newguy05, Jan 27, 2009.
how come there are no berkshire hathaway options for either A or B class shares?
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.
I bet it could be done, everything can be priced and traded on the markets. Someone is just not ballzy enough to try.
Maybe OTC non standarized contracts on the curb somewhere, open outcry. Put a post on the street and a guy with a suit/tie and hat with a big sign. Berkshire options desk.
I'll sell a 2.5 strike put on class A for Jan 11 for $50 lol.
If that goes through, we're in big trouble.
One more quick thought -
The opposite of this that would actually stand to make the exchanges some money would be to create options for some true penny stocks. Only very liquid ones of course. And, I don't mean way out of the money options either. The standard could change for each option to reflect 1,000 shares instead of 100 (maybe this would be automatic on strikes below $1).
For a reasonable real-world example, think about something like SIRI. I am not saying it is a good stock or a bad stock, but even though penny stocks are plenty cheap on their own, I'm sure some people would like to be able to leverage even more. They could list $.10 and $.15 options that would currently be near the money. So, right now, to buy 1000 shares of SIRI is about $110, but maybe a $.15 strike would cost just say $30. That would give the buyer some leverage, and the seller some credit. Since SIRI used to be worth more, it still has options, but they are way too far out of the money to be realistically used.
Of course one thing about penny stocks is they often go under or go through changes such as symbol (going to pink sheets, etc.) which would make the options even more confusing, etc.
I'm not saying anything good about penny stocks or anything - I'm just saying as far as the exchanges go I would bet that adding penny stock options would create more transactions then trying to add a few super-expensive stocks.
Something to think about anyways!
I bet you will find a few buyers willing to gamble 50.
People buy lotto tickets all the time, blow money on the tracks etc..
Maybe, but the potential return on that would be awful - $200 gain if BRK-A goes under!?! I understand buying puts, but that would be nuts IMO.
.....especially if the buyer is Warren Buffett, himself!
if there were options, probably you could drive a car through the spread.
The correct answer is simply that Buffett prohibits their introduction.
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