Warren Buffett & Charlie Munger Explain Options

Warren Buffett and Charlie Munger discuss stock options at the 2002 Berkshire Hathaway annual meeting.

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[surudog]

I love those one liners from Charlie. Amazing.

[cmlon]

on June 3rd 2002 the S&P 500 closed at 1040, 68 so Berkshire got 60 million.

[asiyanbikazeem]

Wow, these men are amazingly smart. Learned a lot about Options just in this few minutes lecture. Thanks for uploading this.

[OnlyTheSon]

Mr munger needs to write a book... MR Mungers greatest 1 liners.. he has hundreds of them..

[richardkuhne]

i don‘t know why but i only seem to understand 50% of what he is talking about.

[AuditorInvestor]

The IQs of these gentlemen (150+) protected Berkshire and themselves from losing money.

[CategoricalImperative]

I’m convinced that Berkshire Hathaway uses selling puts in order to get into most of their positions. Anyone else know for sure?

[ianglenn]

Black-Scholes values options as if the distribution of possible outcomes were Gaussian all the way to the tails, and these two old chuckle-ducks think they are hot stuff (I guess they are for the time) because they have an intuitive sense of what was even then called "fat tails", and one side fatter than the other, Warren talks about this specifically at 3:33

But this tail-value problem on options still exists today, leaving incredible values (high risk too, of course) at the farthest ends of the option chain, where the tails are likely mis-priced.