Berkshire Hathaway (BRK.a, BRK.b) bought a $3.7 billion position in ExxonMobil (XOM) last fall.
XOM shares climbed from about $85 last October to almost $102 before pulling back into the $93 – $94 range yesterday.
Market Shadows Virtual Put Writing account sold one new XOM Jan. 2016, $85 put contract @ $6.50 this morning when the stock was trading for $93.75. Â The new contract is in addition to the XOM Jan. 2015, $85 put we had sold in 2013.
We will either keep 100% of the $650 we received for our option sale or be forced to buy 100 XOM shares at a net cost of $78.50 ($85 strike price – $6.50 put premium). ExxonMobil has spent more than 99% of the last two years trading well above our break-even point. ExxonMobil’s trailing 52-week, dead low is $84.79.
The projected yield, at $78.50, would be 3.36%. That is 43.5% better than XOM’s average payout level of 2.34% since 2007. The P/E at our ‘if put’ price would also be more favorable than is typically available on this high-quality name.
Getting paid ‘not to buy’ is a good result. Picking up shares of a fine company for less than Buffett did wouldn’t be bad either.Â
I sold these same puts for my personal account today, getting filled at an average price of $6.54 per share.
