We have had a series of reports since October about Warren Buffett’s puts sale on Burlington Northern Santa Fe (BNI, Financial). Now all of his puts sold in last October have been exercised, and Berkshire Hathaway made some nice profit with them.
On Dec. 11, two additional chunks of these BNI puts were excised at $75 and $76 a share. With the option premium received, Berkshire Hathaway’s cost is below $70 a share. BNI closed at $74.68 on the day.
With these puts exercised, Berkshire now owns more than 70 million shares of Burlington Northern, more than 20% of the total shares outstanding.
A lot of Buffett followers have been wondering why Buffett uses derivatives, as he is openly against them. But it looks like that the recent market volatility presents the best opportunity for these options. Not surprisingly, Buffett made money again with this investment.
BNI share prices have been declining. It is now at below the average cost of Buffett’s. The recent slide in oil prices erased some of the advantages of railways. Buffett may still be optimistic with the long term outlook of oil, as he added significantly to his position in ConocoPhillips (COP, Financial). And we all know, Warren Buffett is a patient guy.
This is the summary of the puts sale of Warren Buffett:
On Dec. 11, two additional chunks of these BNI puts were excised at $75 and $76 a share. With the option premium received, Berkshire Hathaway’s cost is below $70 a share. BNI closed at $74.68 on the day.
With these puts exercised, Berkshire now owns more than 70 million shares of Burlington Northern, more than 20% of the total shares outstanding.
A lot of Buffett followers have been wondering why Buffett uses derivatives, as he is openly against them. But it looks like that the recent market volatility presents the best opportunity for these options. Not surprisingly, Buffett made money again with this investment.
BNI share prices have been declining. It is now at below the average cost of Buffett’s. The recent slide in oil prices erased some of the advantages of railways. Buffett may still be optimistic with the long term outlook of oil, as he added significantly to his position in ConocoPhillips (COP, Financial). And we all know, Warren Buffett is a patient guy.
This is the summary of the puts sale of Warren Buffett:
| Derivative Security | Exercise Price | Transaction Date | Shares sold | Date Exercisable | Price | Share Cost if Execersed | Price on Date of Exercise (close) | Option Gain |
|---|---|---|---|---|---|---|---|---|
| Put Option (obligation to buy) | $75 | 12/3/2008 | 2,325,000 | 1/30/2008 | $6.35 | $68.65 | ||
| Put Option (obligation to buy) | $76 | 10/16/2008 | 1,000,000 | 12/19/2008 | $6.20 | $69.80 | $74.68 | 7% |
| Put Option (obligation to buy) | $75 | 10/10/2008 | 1,217,500 | 12/12/2008 | $7.09 | $67.91 | $74.68 | 10% |
| Put option (obligation to buy) | $80 | 10/8/2008 | 1,190,476 | 12/9/2008 | $7.03 | $72.97 | $ 75.20 | 3.1% |
| Put option (obligation to buy) | $77 | 10/8/2008 | 761,111 | 12/9/2008 | $5.78 | $71.22 | $ 75.20 | 5.6% |
| Put option (obligation to buy) | $80 | 10/6/2008 | 1,309,524 | 12/8/2008 | $7.02 | $72.98 | $ 76.55 | 4.9% |
