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BRK.B Calendar Call Spread

|Includes: Berkshire Hathaway Inc (BRK.A), BRK.B

On Friday (1/22), following the 50-1 stock split. I entered into a calendar call spread on BRK.B consisting of buying ten June 66s and selling eight March 70s, for a net debit of $4,660 less commissions. I entered the position believing that Berkshire is undervalued, largely because of the market's apprehension about Buffett's well publicized purchase of Burlington Northern for a full price (BRK now trades at a ten-year low price to book multiple), but more in anticipation of increased buying pressure as a result of BRK's likely addition to the S&P 500, which I think will result in BRK.B trading at or slightly above $70 per share for the foreseeable future. Yesterday, S&P announced the addition and the stock traded up roughly 5% today. The position has been successful thus far, but I believe there is far more upside due to time decay over the next several months. Max profit is theoretically unlimited because of the additional 2 June 66s. The position will be solidly profitable if BRK.B trades at or above $70.00 at expiration.


Disclosure: Long BRK.B