Selling puts?

[cptacek]

Can someone explain to me what Warren Buffett is doing?

Warren Buffett Sells Put Option on Burlington Northern Santa Fe, Berkshire Hathaway Filing Reveals -- GuruFocus.com

Does this mean that he wants to be able to buy more BNI stock at $80? If that is the case, he should have just bought them today (it closed at $79.95 today). So why sell the puts?

[sweeps]

He doesn't lose money until the price drops below the strike price ($80) MINUS the cost of the put ($7.02).

In the meantime he can reinvest what he earned from selling the options, if he wants.

[NYFinancialPro]

Basically anybody who bought those put options, are betting that the stock is going to drop less than $73 at which point the option would be "In the money", if the option is exercised by expiration, Buffett would have to buy the stock at $80 above current market value.

So Buffett is betting that the stock is not going to drop that low before the December experation. If he is correct he is going to profit $7 for every option he sold! If not depending how low the stock goes, he will have to acquire some more shares of the holding, but it looks like he is heavily invested in them anyway, so he wont mind buying the at a price lower than his average purchase price anyway.

[kork13]

Basically anybody who bought those put options, are betting that the stock is going to drop less than $73 at which point the option would be "In the money", if the option is exercised by expiration, Buffett would have to buy the stock at $80 above current market value.

So Buffett is betting that the stock is not going to drop that low before the December experation. If he is correct he is going to profit $7 for every option he sold! If not depending how low the stock goes, he will have to acquire some more shares of the holding, but it looks like he is heavily invested in them anyway, so he wont mind buying the at a price lower than his average purchase price anyway.

Poor Mr. Buffett.... how unfortunate that he has to concern himself with such matters.... ^_^ I wish I had the money to even CONSIDER that sort of stuff. hahaha