commentary by: David Russell
Option volume exploded in Berkshire Hathaway today after the company split its shares 50 for 1, which increased liquidity in Warren Buffett’s insurance and utility conglomerate.
Some 13,700 options contracts changed hands on the company’s B-shares today, more than 90 times greater than the average. The action was tilted toward the bulls, with heavy call buying and most put activity resulting from sales.
New money streamed into the February 76 calls, which changed hands 2,284 times for $0.50 to $1.15, and into the February 72 calls, which mostly traded for $2 to $2.50. Existing contracts were adjusted to reflect the lower stock price after the split.
BRK-B reached a new 52-week high of $73.43 before pulling back to $71.39 in morning trading, still up 2.69 percent on the day. The company split the shares as part of its purchase of railroad Burlington Northern in early November just days before it last reported earnings.
The February 70 puts were the most active option contract. Investors sold about 2,700 contracts, generating as much as $1.35 of premium. The strategy reflects confidence that BRK-B will hold the $70 level. Overall in the name today, calls account for 71 percent of the options activity.
(Chart courtesy of tradeMONSTER)
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