By Steven M. Sears
Greg Abel has an enviable problem.
As Warren Buffett's successor as CEO of Berkshire Hathaway, Abel has inherited about $382 billion, give or take a few billion, in cash.
It has been oft noted by commentators who excel at statements of the obvious that Berkshire has enough cash to buy many of the world's most-admired companies. What is rarely noted, however, is that many of these stocks are trading near record highs.
It isn't readily apparent Abel can find conditions, at least in listed markets, that satisfy the simple and profound counsel proffered so long ago by Buffett's late partner, Charlie Munger.
"A great business at a fair price is superior to a fair business at a great price," Munger famously told Buffett, who then changed his approach and became one of history's most successful investors.
Abel almost certainly has ideas about optimizing corporate cash, but we respectfully offer an idea that monetizes Munger's insight in a way that many traditional stock investors fail to consider without prompting.
Abel could buy more of the great businesses in Berkshire's portfolio at current prices, or enhance returns on the company's massive cash position with a simple options strategy: cash-secured put sales.
The strategy entails using the cash to securitize the sale of put options. It lets investors pick the purchase price of their selected stock. If the stock falls below the put strike price, investors can either buy the stock at that predetermined price or adjust the put to avoid assignment.
One great quality of cash-secured put sales is that investors keep the money they make for selling the put if the stock price is higher than the strike price when the option expires. We have long championed this approach, and it has become one of the market's most popular strategies.
Market conditions favor the move. President Donald Trump's insistence on invading Greenland, and his threat of tariffs against America's allies, has caused global stock prices to plummet and options' implied volatility to surge.
Berkshire's portfolio includes Alphabet, Apple, Bank of America, Chevron, Coca-Cola, Visa, and many others.
Consider Chevron, a company that is much in the news following America's ouster of Venezuela's president. Chevron is often identified as well positioned to benefit from Venezuela's oil fields.
Abel could enhance Berkshire's Chevron investment by selling puts with strike prices below Chevron's stock price. He just needs to pick the price at which he would be willing to buy more stock. If the stock is above the put strike at expiration, Abel keeps the cash, which almost certainly rivals Chevron's quarterly dividends. One drawback: Berkshire would face a tax bill for short-term capital gains.
Many wealthy investors use this strategy -- particularly on the S&P 500 index -- to enhance returns on uninvested cash.
The strategy often works like a charm when markets, and stocks, are trending higher. But it is imperative that anyone who sells puts has money set aside to buy the associated securities, which shouldn't be a problem for long-term investors.
Many investors will remember that Buffett has criticized derivatives, but few realize that Buffett also was a major force in the options market. In particular, he sold S&P 500 options that expired in 13 years to insurance companies that hedged variable annuities.
Every banker in the world is presumably pitching ideas to Abel. Our approach is designed to buy him some time to think by doing something more with the cash while positioning to buy more of Berkshire's great companies at good prices.
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(END) Dow Jones Newswires
January 23, 2026 21:30 ET (02:30 GMT)
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