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Buffett’s Secret Map to Option Profits

re: Buffett’s Secret Map to Option Profits

 

I have not yet read the PDF described in the post but from one of the comments of this post, the math is not sounded.

 

See, I agree that writing puts in some way is like borrowing money from the puts’ buyer except there is no fixed borrowing period if it’s an American option.

 

American put options buyer can exercise their puts at any time and not have to wait till it’s expiration date. So, in the extreme example used by Buffett, if the S&P500 loses half of it’s value 1 years after the put was written and the buyer decided to exercise, then the option writer is royally doomed…

 

Not sure if I missed something… I plan to read the described PDF to better understand the example and presumed conditions… after all, he is Buffett, he can’t possibly not know this minor detail.


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