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Grahamites
Grahamites
Articles (169) 

Naked Short Put Options - Warren Buffett's Little Secret

April 23, 2014 | About:

Comments

pravchaw
Pravchaw premium member - 2 years ago

Does Gurufocus track shorted put options for the guru it follows? This might give us insight into future moves by the gurus?

gurufocus
Gurufocus premium member - 2 years ago

@Pravchaw, No, we don't. The information is not available.

Cogito
Cogito premium member - 2 years ago
@Mslatnh: contract size may vary considerably between different option contracts, depending on the price of the stock. I wasn't able to find NASDAQ contract specifications (does anyone know where to find them?), but I can provide an example for German Eurex: e.g. the table on page 145 of the following document shows contract sizes of options traded at Eurex: [www.eurexchange.com]
Steve Pomeranz
Steve Pomeranz premium member - 2 years ago

Thanks for hunting down those bnsf options. That was great info that I would never have known.

Good job!

mlovell
Mlovell premium member - 2 years ago

@Mslatnh "Now let’s take a look at how Mr. Buffett used put options to lower his purchase price of Coca-Cola (KO). In April 1993, Buffett shorted 30,000 contracts (equivalent of 3 million shares) of out-of-the-money Coca-Cola put options for $1.5 per piece."

Grahamites
Grahamites premium member - 2 years ago

Mslatnh: Standard contract size is 100 shares per contract but Buffett can get non-standard contract such as the BNI contract. The important thing is the number of equivalent shares.

Cogito and Mlovell: Thanks for helping out with the clarification.

Steve: Not a problem. Knowledge is most helpful when shared with a purpose.

w1omega
W1omega - 2 years ago

fantastic article! Would you happen to know good places to look up options price history? I don't think Black Scholes captures all the value of common stock as valued by a competent value investor. You do give up liquidity though when you short put options since you might be called on it.

quixote1
Quixote1 - 2 years ago

Huff.....this guy suck its thumb just very ocasionally .

He´s very cautious to make a long term bet which is very unlikely and he invest the proceeds on another cautious way to generate a ton of money along the way.

So when he´ll long pass away his betts will be making money......awesome to say the least!

Wjhpc
Wjhpc premium member - 2 years ago

I find your phrase "shorting" put options somewhat confusing. The more common terms among options traders are "writing" or "selling" put options. Otherwise, interesting research.

thanks,

toponemike
Toponemike - 2 years ago

very good work!

cgcoss
Cgcoss - 1 year ago

could someone point out a source for the Coca Cola puts sold by Buffett?

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