Berkshire Hathaway (BRK.B) Options Strategy: Low Volatility, Consistent Premium
BRK.B's Unique Profile
Berkshire Hathaway B shares trade around $470 with IV in the 16-22% range, among the lowest in the S&P 500. The stock does not pay a dividend and rarely makes headlines between Buffett's annual letter and the annual meeting. It just steadily appreciates.
The low IV might seem unattractive for options sellers. But the high share price means dollar premiums are reasonable. Selling a covered call on 100 shares of BRK.B at $470 generates $350-600 per month, which is meaningful income despite the modest IV.
Covered Call Premiums
| Strike | DTE | Premium | Annualized Yield |
14% annualized might not grab headlines, but consider what you are getting it on. BRK.B is arguably the safest single stock in the market. It is a diversified conglomerate with $180+ billion in cash, insurance operations, railroads, energy, and a massive stock portfolio. The 14% yield comes with dramatically less risk than a 40% yield on SNAP or ROKU.
Why BRK.B Covered Calls Work
Low Drawdown Risk
BRK.B's maximum drawdown in 2022 was about 18%, compared to 33% for QQQ and 25% for SPY. In 2020, while the S&P dropped 34%, BRK.B dropped 26% and recovered faster. This downside resilience means your covered calls rarely get tested on the downside.
Steady Appreciation
BRK.B compounds at roughly 12-15% annually over long periods. The stock does not spike and crash. It grinds. This steady appreciation means your short calls are breached gradually, giving you time to roll rather than getting blown through on a gap.
No Dividend Complication
BRK.B pays no dividend, which eliminates the early assignment risk that complicates covered calls on dividend stocks like KO or T. Your short calls will not be exercised early for dividend capture, simplifying position management.
Strategy Approach
Monthly 20-Delta Calls
The core strategy: sell the $490 call (roughly 20-delta) for $5.50 monthly. This leaves 4.3% upside room. BRK.B moves more than 4.3% in a single month only a few times per year, usually during broad market corrections or the annual meeting.
If called away, you sell at $490 for a total gain of $25.50 ($20 appreciation + $5.50 premium), or 5.4% in one month. That is a fine outcome.
Quarterly 15-Delta Calls
For less active management, sell 90-DTE calls at the 15-delta for approximately $10-12. Roll every quarter. This reduces trading frequency to four times per year while generating 8-10% annualized premium. Add the stock's natural appreciation of 12-15%, and total return reaches 20-25%.
Annual Meeting and Letter Timing
BRK.B has two annual information events:
Annual letter (late February): Buffett's commentary can move the stock 2-4%. Avoid holding short calls that expire within a week of the letter's release.
Annual meeting (early May): Less market-moving but generates media attention. IV may tick up slightly in the days before the meeting.
These are modest catalysts compared to earnings reports at other companies, but worth noting for timing covered call entries.
Capital Considerations
At $470 per share, one covered call contract requires $47,000 in stock. This is substantial. For most retail traders, BRK.B covered calls represent a significant portfolio allocation.
Sizing recommendation: One contract should represent no more than 15-20% of your total options portfolio. The low volatility means the position is unlikely to blow up, but concentration risk is real.
Alternative: For smaller accounts, use a diagonal call spread. Buy the $450 LEAPS call (12-18 months) for approximately $45, and sell the monthly $490 call for $5.50. Capital required: $4,500 instead of $47,000.
Who Should Trade BRK.B Options?
Conservative investors who want steady income on a stock they plan to hold indefinitely. The 14% annualized yield on a covered call transforms BRK.B from a zero-income stock into a meaningful income generator without sacrificing the fundamental quality of the position.
OptionsPilot tracks BRK.B's IV percentile against its narrow historical range, alerting you when premiums are at the higher end and worth selling.