The Berkshire Hathaway annual report released on Saturday is full of information for Buffett watchers, but for those fascinated by the very large put options sold by the great Sage of Omaha, turn straight to page 47.
As of the end of 2013, and as predicted by our good friend Pablo Triana at the Esade Business School, fair value for the put liabilities of $4.7bn is now less than the $4.9bn of premium Berkshire received for writing the options.
Broadly, what that means is Warren could offer to buy back the puts at a small profit. We think it’s unlikely, but it illustrates the underlying reason for writing them in the first place – the use of billions of dollars of capital for several years. Read more