the bottom signal..........Buffett blows up

Discussion in 'Trading' started by apitrader, Oct 24, 2008.

  1. Get up warren, cleare up the ES offers.
    Warren suddenly found selling put is not as funny as he thought.
    Warren worked hard and built up the wealth and reputation the whole life. Suddenly warren thought warren should appear on tv, newpaper headline. Warren was right almost a century, and "humble" is not in warren's dictionary anymore. But warren need do something fancy to shock the world by appearance. Warren thought calling a bottom is fancy enough. Yeah, do it, just do it baby, shock the f*ing world.
    Warren's margin call (not yet) will be the only indicator to pick the bottom.
  2. source please?
  3. bh_prop


    The source? Some random ET schmuck spouting off nonsense


    In Berkshire Hathaway's (BRK.A) Annual Report, Buffett announced that Berkshire has taken in $7.7 billion in premiums on 94 derivatives contracts it has entered into.

    Buffett said he has taken in $3.2 billion in premiums on 54 derivative contracts that require the firm to pay up if certain bonds in various high-yield indexes default. The options expire between 2009 and 2013, and could expose Berkshire to losses as large as $4.7 billion. The odds of that are "extremely unlikely to occur" according to Buffett, who said that as of Dec. 31, Berkshire had paid out just $472 million on those contracts.

    The remaining options come from the sale of put options, which give the buyer the right to sell a contract to Berkshire at a certain date. Buffett says the company has sold 15- or 20-year put options on the S&P 500 and three foreign indexes. The puts are exercisable only at their expiration, which is between 2019 and 2027. The options were struck at the market price on the day they were written.

    Essentially, Buffett is betting that stock prices will rise over the next 15 to 20 years. This means that any rise in the S&P to levels above the level on the day the contract was written renders to options worthless to the buyer. On the put option sales Buffett has taken in $4.5 billion in premiums.

    The selling of put options is a great way to add to your returns and decrease your cost basis on the purchase of a stock. If done correctly, the strategy is very low risk. You sell out of the money put options on companies that are trading at prices you would buy the stock at today. In this scenario if the stock rises, you keep the money and walk away, if the stock drops in price (below where you sold the put at), you are then forced to buy the stock but because you sold an out of the money put, you are buying it at a lower price than you would have initially.

    This only works in stock that you would want to own and hold. The worst thing would be to own a stock in a company that you have no interest in.
  5. Daal


    even those puts get exercised they are the last thing Buffett will be worried about. his entire portfolio would have been decimated. but thats not going to happen
  6. AK100


    Not saying that Buffet will be wrong or right but he does something that 90% of investors DON'T do, ie he has a vision to look several years down the road.

    Most market participants to me, even the long term ones seem to forecast the long term trend on what happened that day or week.

    So if down this week 'oh no! it's a bear market' but then next week the market rises 'great, the bull is back' the following week it goes down 'sorry, bear market is now upon us' and on and on.

    Stop watching the markets tick for tick (unless you're a short term trader) and you might all get better results on your 'long term' investments........
  7. Wouldn't THAT be a HOOT? Do you think CN-BS would carry that story. (Actually, I don't think he buys on margin.. ??)
  8. I didn't know that selling puts was part of a buy and hold strategy... sounds more like a Gordon Gecko strategy
  9. Isn't ET great?
    The TRADING FORUM has incredible value.
    Just a notch or two above a Yahoo Message Board.

  10. He grew up and prospered greatly off a system that has now run its course.

    Unfortunately for him either he has not realized this, or more likely he hasn't admitted it in public yet, and never will to keep all the "Buffett fan" meatheads following his every move.

    And who is asking for sources for someones opinion?

    I believe the OP came up with this idea on his own and that is much more creative and thought-provoking than copy and pasting another persons opinion!
    #10     Oct 24, 2008