Warren Buffett's view on using futures and options contracts rather than buying the stock
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- Опубліковано 3 лис 2018
- Warren Buffett gives his thoughts on using futures and options contracts rather than buying the stock. From the 1997 Berkshire Hathaway annual meeting.
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"You can't beat the market but you can beat your meat"
~ Warren Buffett
😂
He really is a stupendous individual
It's how Bruce Wayne went broke - his options expired at midnight.
That’s funny
I'm from Brazil, Buffett is a genius!!!
Spot on.
Sell to the gamblers don't be the gambler.
covered calls and cash secured puts
Buffet doesn't even do that. He sells insurance and buys dilutive warrants.
Borrowed money usually leads to trouble…
Don’t take your eye of the main ball. Stick to buying ownership in businesses.
About Using LEAPs:
Why risk losing what you need and have, for what you don’t need and don’t have?
The person with the question didn't mention borrowing money, he just asked about buying leaps. Warren answered it as if he was leveraging it, which didn't answer the actual question directly.
LEAPs are borrowed money. You are paying someone to loan their shares to you for a period of time and keep what their stocks make above your contract price.@@truckstomotorcycleswithtom3197
The hilarious thing about the Berkshire meeting every year is the majority of the shareholder questions are so generic surrounding investing advice, we rarely get to really get an idea on what the heck reasoning brk bought any of the companies they did
That’s easy: they don’t explain it. They are not in the business of explaining what company they bought for what reason. Actually if they buy some foreign stocks and they are not legally obligated to publish it, they don’t even say it.
What they explain is how they do their investing, but like I said they don’t say this and this company is good and we would be this amount of price for that reason. This job you have to do yourself
If they did that they would have much bigger problems buying those stocks for a good price
@@Casskario Not only that but…Buffett doesn’t want upper middle or even newly wealthy people to buy shares in his company. He tells us to buy the market and hold while he figures out some way to make ultra-wealthy people almost as much on a percentage basis, or maybe slightly more in the best of times, than we get. We’re the target audience here not those rich dudes.
Your comment has an inherent logical flaw. On the one hand, you say all the questions are generic surrounding investment advice. Yet the second part of your comment is answered in that the very advice given explains the reasoning behind the transactions.
Sage advise as always from the pair :)
I love what he says about heading down the wrong path if it works... playing with dynamite
Yeah when leverage works it goes to your head until the leverage stops working
Thank you 🙏
I guess it's a blessing coz I never could understand options it feels so crazy I have to invest in stock but it takes a long time to get rich and I don't start with much as in look at my English its lack of education I'm from the South but the stock market is always been a great investment thank you Warren I love you I didn't have a father but you're the closest thing to my financial father God bless you and I'll tell Jesus how great you were. ❤😂😢😊
2:22 this is the best takeaway. Once we focus on daily movements of FnO companies, focus on other small cap opportunities shrinks.
Meanwhile, He is the largest option seller in the world...
Circle of competency grew
Technically he is 100% right since buying leaps cost money everyday vs buy hold. He didn’t talk ab selling for premium…
He sells to the gamblers.
@@johngreen907 I think he does it to troll
Preferred stock is not option...
I agree with buffet. But if you know options and know the risk it’s worth it.I have traded options for > 6 years I think in my opinion the risk is expiry and the future stock price. Example I currently own US bank USB 37.5 call expiring 1/22/2022 at a cost $500 or $5 per contract. It’s risky but a worthwhile risk. I think banks in general are cheap due Covid. instead of paying $3700 I paid $500. Yes it comes with risk I could lose the entire $500 so not for everyone. Also, another strategy I use is to use your profit that you got from stocks to trade options above example. this way if u lose money it’s ur profit but with huge upside potential hope this helps
Could you sell the option right now, or do you have to wait until 2022 to cash out?
@@andrewsottile2016 you can technically sell it whenever they’re just needs to be a buyer
Do you, as a retail investor sitting at home with your computer, know options and the risk better than large scale institutional investment banks do? As Mike Tyson once said, "everybody has a plan until they get punched in the face."
Nice. It's worth around 2300 now
@@abc-jq4hi faith*
Option and futures are complex instruments and a normal investor would not understand the composition of these options and the reason behind the changes in prices, that's why buffett is always against this. Options and futures are to be used only to hedge your positions in stocks.
They are the weapon of mass wealth destruction if not used wisely.
Not very up to date information. Options are extremely easy to use and if you payed any attention in these last three months its that retail investors have accumulated quick gains from naked calls and put options. The only complex part about options is behind buying or selling more than one to achieve condors or straddles.Also, the greeks are a quick google search away and anyone with a stimulus check and robinhood can figure it out pretty easy.
Option can make you millionaire or can make you broke. All within less than a day🤣🤣
Stonks only go up!
Couldn’t one argue that hedging isn’t a smart move in the firsts place because it means that you have doubt about your investment?
@@straightXDspear Their is no such thing as doubt, it's just market is full of irrational people it's a hedge against them and not against the stock😀
Awesome
Leaps on AAPL long calls
Welcome to investing, don’t forget to sell your same strike price but at a closer expiration thus making a colander spread with a bullish tendency m.
2:20
Why are they calling leaps borrowed money?
You can buy options including leaps on margin on brokerages like TD ameritrade, but i think his point is you can loose your shirt playing with options in a way that you won't investing with plain stocks.
Leaps are leveraged because they control more value of shares than the cost of the option (at least at purchase)
LEAPs are borrowed shares technically, which is not as risky as actually borrowing money (since you only lose what you bought with your contract rather than losing someone else's money). I think this is what he was referring to.
Get rich quick schemes. Futures
He bought billions in BAC warrants during the financial crisis.... I guess he changed his mind.
Louis Landolfi this is because he’s talking about from the perspective of the average investor cuz the average investor usually does not have enough capital to sustain the major losses that come with options trading which are inherently very risky but he personally trades in options because it’s economically smarter and gives a larger cap company like Berkshire better value for their money
I think he should’ve said in most situations
@@adityag485 I don't understand your argument. You're essentially saying berkshire can afford to make options bets with 1% cash management while the average investor can't do the same? I think that's wrong, you assume the small cap investor uses 100% of their portfolio in leveraged trading, why? Berkshire doesn't do that either...
He practically got them for free
The BAC deal was too good to pass up.
I am amused how warren can keep a full glass of coca cola in front of him for hours. I finish it as soon as i get my hands on it.
Oh that’s cuz it’s not shown in this video he has people come up to him that refill it out of cans or large pitchers
I've never been able to swallow that stuff for some reason.
You're telling me a man that can baby sit a stock for 40 years, can't keep his hand off a can of soda for an hour or so?
warren is not like you and me, warren is built different
He says “I know the answer”… well why ask the question then?
I don’t know who so many of these people feel the need to appear smart with stupid (often long winded) lessons.
Warren doesn’t understand options investing. He’s done enormously well doing what he’s done but he could have done even better with options.
Yea I'm sure some guy on UA-cam should teach Warren about finance.
3:20 Buffett is talking about not doing it on leverage because for all the shares money he receives from investors for the past 40+ years he never had to pay one penny in dividend or interest.
What a racket! No one else can have that set up
Imagine people give you money and you do not need to pay a return but you go buy an apartment building all cash and get to keep all the next operating income year after year to buy more real estate!
Then everyone asks you: but how do you do it?
So you say, we buy good buildings that produce income and we use no leverage 😂😅
That's not how stocks work, if I bought 1 share of Berkshire for 100 bucks and sell it to you 350 a few years later, none of that money went to Buffett.
@@peters6850 no Sir. The point is Berkshire whose controlled by Buffett as the largest share holder, pays zero dividend. So the company is not a productive asset as per his definition for any of the investors/share holders. No one else can get a way with such a structure for so long. That’s how he/Berkshire is able to sit on billions to turn pounce on great deals when companies abd economies go through their cyclical pattern. Imagine people giving your company money and you do not have to pay interest. Just buy a building and keep reinvesting all the cash flow. Your company’s net worth will quadruple abd more over time.
@@patmarco2251 the dividend doesn't matter. It's built into the stock price. Just sell a share and you reap the benefits of what buffett has done all these years
Interesting that WB does use options on his strategy. Sheer hypocrasy
Levereged trading is really dangerous, would not recommend.
Only lock volume pattern for 60%. Options come from property ownership at the origin.
He's a genius but we are not him. He has money to sit for long term.. Meaning 20yrs from now. You got to find your edge in the market and what works for you.
You know, before 1929... it was normal for middle class to buy on 10X leverage. It was a big reason the crash was so bad. Everyone got called on margin. Traders jumping out of windows to their death.
LEAPS are a great way to trade stocks. Futures are great as well.
@@SurferTy micro futures and one contract credit/debit spread options are best for little risk
@@Music-tf1yn yep. But do most middle class even know about micro futures?
@@SurferTy Your right, America has done a horrible job at educating us on real finance. Heck selling puts and covered calls could changed some peoples lives forever. Jesus out
GME
Dont trust these elites
His company is public mate
*Warren Buffett* "Futures and Options are for degenerate gamblers!"
"""""Has Berkshire Hathaway ever used Derivatives?"""""
*Warren Buffett* "Well er ummmm..... there not for you poor peasants to use shut up"
This goes to prove that Buffett is completely out of his depth when it comes to options.
Oh ya the most successful investor ever. Seems to me options traders are the ones out of their league
Warren who?
Stan Starygin this is because he’s talking about from the perspective of the average investor cuz the average investor usually does not have enough capital to sustain the major losses that come with options trading which are inherently very risky but he personally trades in options because it’s economically smarter and gives a larger cap company like Berkshire better value for their money
You're just born a dumb ass.
@@williamh.gatesiii8183 @William Gates III Buffett is not the man with the highest returns. Plus it helps being born the son of a guy who ran for congress. Just ask his buddy Munger who got into Harvard without a degree after his family friend made a phone call. Now how about that Apple OS you stole...