Everything Warren Buffett: CNBC: Berkshire Hathaway Stock Options Begin Trading Today

Friday, June 19, 2009

CNBC: Berkshire Hathaway Stock Options Begin Trading Today

Published: Thursday, 18 Jun 2009 | 11:59 AM ET

By: Alex Crippen
Executive Producer

Options on Berkshire Hathaway's Class B shares begin trading today on the Chicago Board Options Exchange.

A news release from the CBOE says initial strike prices will be set at $2800, $2900, $3000, and $3100 for the March expiration cycle.

Berkshire's Class B shares, worth roughly 1/30th of a Class A share, closed yesterday (Wednesday) at $2874. Current price: [US;BRK.B 2829.01 -44.99 (-1.57%) ]

The CBOE notes it is "hard to tell what kind of options volume will ensue" given the relatively light trading volume of the underlying shares.

Options are often used by investors either for speculation, or as a form of insurance.

The CBOE provides extensive information through its Options Institute, including a run through of basic options concepts.

As Bloomberg notes, Berkshire is not involved in the buying or selling of options on its stock and makes no money from the trading activity.

Buffett says he generally doesn't like to use options, but there are exceptions.

Most notably, Berkshire has sold billions of dollars worth of put options on several equity indexes, making a controversial bet on the long-term health of global stocks.

Berkshire also sold put options on Burington Northern Santa Fe late last year.

Bloomberg quotes Buffett as saying last year, "Unusally, if you want to buy or sell a stock, you should buy or sell the stock. Using options, four times out of five you will be right, the last one you'll miss. I've virtually never used options as a way to enter or exit a position."

Current Berkshire stock prices: