Option traders will soon be able to speculate or hedge their risk in the shares of Berkshire Hathaway Inc
The Chicago Board Options Exchange, the largest U.S. options exchange, said on Wednesday that it will list options on Berkshire Hathaway Class B shares, effective on Thursday.
Berkshire's Class B shares are worth 1/30th of a Class A share, and are more widely held by individual investors. The shares were lately traded at $2,891.50 each on Wednesday.
I think this is significant because this gives individual investors more transparency and the ability to hedge Berkshire shares using listed options, said Steve Claussen, chief investment strategist at Chicago-based online brokerage OptionsHouse.
These listed options would also allow retail investors to gain exposure to share price moves when it was possibly too expensive to do so in the underlying stock, Claussen said.
The Designated Primary Market Maker for the options is Barclays Capital, CBOE said in a release.
Initial strike prices will be $2,800, $2,900, $3,000 and $3,100 in the expiration cycle of March.
Introductory expiration months will be July, August, September and December and position limits will be 25,000 contracts, CBOE said.
Buffett, one of the world's most-admired investors, has used derivatives in Berkshire's own portfolio, though he has called some derivatives contracts financial weapons of mass destruction.
A derivative is a contract whose value is tied to an underlying security.
(Reporting by Doris Frankel; Editing by Kenneth Barry)