New trade with downside protection and high return potential.
music selection: “Long Way To Love” — Britny Fox
Berkshire Hathaway (BRK-B) is probably well known to the readers of this page. It is the insurance and holding company run by Warren Buffet and Charlie Munger. The company is legendary for long term shareholder returns. It is currently lagging the S&P 500 in recovery from COVID-19. I don’t think that can last. For one thing, the company has 187 billion dollars in cash and short term investments on hand. The next big acquisition could be days away. And the company is certainly immune to short term stress from coronavirus with a balance sheet that strong.
With shares trading at 184.34 I bought the 19JUN2020 177.5/180 strike bull call spread. I bought four spreads at a net debit of 1.90 a share. The trade will be in force for about 19 days and enjoys 2.35% downside protection before profits are threatened and has 3.39% of downside protection to breakeven. That would be a big move down for a mega cap in a short period time when an uptrend is in place. Should that downside protection not be breached, the full profit of 240 dollars will be realized against 760 dollars at risk. That is a 32% nominal return or 372% annualized.
Devour your prey raptors!