Buffet to expire before his options?
November 27, 2008
Interesting and amusing article written by John Gapper of the FT, on how Warren Buffet at Berkshire Hathaway has written $35bn of put options and is currently suffering from a mark-to-market loss of $5bn on the deal.
Buffet has basically received $4.5bn of premium for taking on the risk (placing the bet?) that four equity indices will not fall below their current levels during 2019 to 2027. Seems a strange investment for the man who called derivatives "weapons of mass destruction", and also very reminiscent of the long-dated options strategy for hedge funds (see earlier post). Gapper expresses confidence in Buffet as a risk taker, but points out that the real risk is whether Buffet will still be around to manage Berkshire Hathaway in 2027.