No. of Recommendations: 8
Those rates seem a little low to me, but our calculation methods may differ.

Be sure to use bid and ask figures, not last trade price.
These things don't trade all the time.
Experience has shown that you can usually trade them at 3/4 of the way across the gap.
So, when buying, you'd likely pay .25 * bid + .75 * ask.
(exceptions during those rare moments when somebody is trying to trade a contract---
this shows up in the bid quantity, anomalously low, or a kink in the graph of implied interest rate versus strike)

I [almost] always recommend the longest dated contracts.
It gives time for valuation factors to outlive shorter term price noise cycles.
They pocket about $100m a day in profits, so there is a gradual upwards pressure on price.

At the moment I'd estimate a buyer of the new 2022 BRK calls might pay:
Strike $140 4.6%
Strike $180 6.2%
Leverage is 2.57 and 4.18 respectively.

The implied rate figures for 2021 seem pretty similar. 4.5% and 6.5%.


Those figures are based on annualized extra_cost/implied_borrow.

Or,
(how much worse the ending break even price is buying calls today versus buying stock today) /
(the amount lower the cash cost is today buying calls instead of stock) * 365 / (days to expiry).

Unless I made a typo, that's
((strike + .25*bid + .75*ask)-stockprice)/(stockprice - (.25*bid + .75*ask)) * 365/830.

Those aren't very good borrow rates these days, but the nifty thing is it's a "loan" that can't be called, no matter what chaos goes on in the markets.
You have the option--literally.

Volatility does matter a bit. As does the price of the stock, for any given numerical strike.
I have been watching the 2022s since they listed.
At one point the average rate for the four lowest strikes was 4.25%. It's 4.56% today.

Jim
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