That's an interesting question about Buffett's options strategy. Let me look into this.## Buffett Sold Puts on Both — Individual Stocks and Indices

Buffett's use of cash-secured puts wasn't limited to indices. He did both, but they served different purposes and operated on vastly different timeframes.

Individual Stocks (Shorter-Dated, American-Style)

These were tactical — used to acquire shares of businesses he already wanted to own, at prices he already considered attractive:

The logic was identical in both cases: he'd already decided the stock was worth owning at the strike price. The premium was a bonus — "heads I win, tails I buy a great business at an even better price."

Indices (Ultra-Long-Dated, European-Style)

Between 2004 and 2008, Berkshire sold $37.1B notional in put options across:

• S&P 500 (US)
• FTSE 100 (UK)
• Euro Stoxx 50 (Europe)
• Nikkei 225 (Japan)

This was a completely different animal — 15 to 20-year European-style contracts (no early exercise), struck at-the-money, collecting $4.9 billion in premiums upfront. He treated these not as stock-picking but as insurance/float operations: collect premiums now, invest them for decades, and only settle in 2019–2028. As he put it, for Berkshire to lose the full $37.1B, all four global indices would have to go to zero.

Key Takeaway

The individual stock puts (KO, BNI) were about getting paid to buy stocks he loved at a discount. The index puts were about selling long-dated insurance on global equity markets and deploying the float. Both shared the same principle — only sell puts when the premium compensates for a risk you'd willingly take anyway.

Good question. Let me dig up the specifics on the BNI put trades — the stock price at the time, the strike, and the premium — so we can compare directly against your approach.Here's what the data shows, and then how your approach stacks up.

Buffett's BNI Put Trades — The Numbers

Buffett sold puts on BNI across multiple tranches in late 2008. The most detailed filings show:

Those are not typos. Buffett sold essentially at-the-money or barely out-of-the-money on BNI during a financial panic in late 2008, collecting an absurd ~45–53% annualized premium. He was not going 10% or 20% OTM looking for a safe 3–5% yield. He was going roughly 0–3% OTM, at the peak of the crisis, and getting paid enormous premiums to do it.

For context: the first trade — $80 strike with BNI trading at ~$80 — was effectively ATM. The Dec trade was only ~3.2% OTM ($75 strike vs $77.50). Both expired ITM and he got assigned. The $7.02 put on the $80 strike meant his net cost basis was ~$73 — exactly where he said his "line in the sand" was.

The Coca-Cola trade (1993) was similar: stock at ~$39, strike at $35. That's about 10% OTM, $1.50 premium, ~8 months duration, for roughly a 5.5% annualized yield on the $35 commitment.

Your Strategy vs. Buffett's

The honest verdict: your approach is the opposite of what Buffett actually did. He went close to the money and got paid for it. You're going very far OTM and collecting thin premium.

That's not necessarily bad — it's just a fundamentally different strategy. What you're doing is safer, more like collecting a slow drip of income from insurance premiums almost nobody will ever claim. The drawbacks:

• Capital efficiency is terrible. You're setting aside a lot of cash to collect 3–5% on the put commitment, not on invested capital. Even money market funds yield more right now with zero stock risk.
• You almost never get assigned, so you never actually acquire the stock at the discount you wanted. Buffett's whole point was using puts as a buying tool. Your strategy becomes purely an income play.
• On a risk-adjusted basis, if you're setting aside full cash collateral for a 50% OTM put yielding 3–5% annualized, you're likely underperforming short-term Treasuries with more complexity and tail risk.

Buffett described his put selling as: "I want to own this stock at this price anyway, and you're going to pay me to wait." He picked a price he already wanted to own it at and sold the put there. He didn't pick a price 50% below the market and hope for 3–5%. He picked the price he actually considered fair value — which happened to be much closer to the market — and got paid handsomely, especially when fear was high.

If your goal is capital preservation with a tiny yield kicker, 50% OTM works fine. If your goal is what Buffett was doing — acquiring great businesses at attractive prices while getting paid — you'd likely do better moving closer to the money on stocks you have genuine conviction in, and sizing correctly for assignment.

Let me track down Buffett's own words on this — both from his shareholder letters and direct quotes.Good — let me now be precise about sources rather than paraphrasing. Here's what I can attribute directly and what's a distillation by others.

Direct Primary Sources (Buffett's Own Words)

On the index puts — 2008 Berkshire Hathaway Shareholder Letter (p. 18–20):

"Our derivatives dealings require our counterparties to make payments to us when contracts are initiated. Berkshire therefore always holds the money... This float is similar to insurance float: If we break even on an underlying transaction, we will have enjoyed the use of free money for a long time. Our expectation, though it is far from a sure thing, is that we will do better than break even and that the substantial investment income we earn on the funds will be frosting on the cake."

"Both Charlie and I believe that Black-Scholes produces wildly inappropriate values when applied to long-dated options. We put our money where our mouth was by entering into our equity put contracts."

These are from the 2008 letter, freely available at berkshirehathaway.com/letters/2008ltr.pdf.

"You don't get paid for activity, you only get paid for being right" — 1998 Berkshire Annual Meeting:

This is a verified Buffett quote from the Q&A session. He was not talking about options specifically; he was talking about waiting for the right investment opportunity. But it's the philosophical underpinning of the "get paid to wait" idea that option sellers later attached to his put strategy.

Where the "Get Paid to Wait" Framing Comes From

The specific phrase "paid to wait" as applied to Buffett's put-selling on individual stocks is not a direct Buffett quote. It's a distillation — by journalists, analysts, and Buffett watchers — of what he was doing:

• For Coca-Cola: He thought KO was a buy at $35 but it was trading at $39. Instead of placing a limit order, he sold puts at the $35 strike and collected $7.5 million. He was willing to own it at that price; the premium was compensation for waiting.

• For BNI: SEC filings (Form 4s filed Oct–Dec 2008) show National Indemnity sold puts at $75–$80 strikes. At the time, BNI traded around $77–$80. Buffett told CNBC at the time that he considered the railroad "irreplaceable infrastructure" and was happy to accumulate more.

The framing comes from the logical inference of his actions, documented in SEC filings, combined with his stated philosophy from shareholder letters: sell insurance (including puts) only when the premium compensates for a risk you'd already accept.

On Your FD vs. Put Strategy

You mentioned you're doing low-yield puts on money currently held in a fixed deposit. Here's the honest math you should run:

• FD rate today: roughly 4–5% in many markets, fully risk-free (or govt-insured)
• Your put strategy: 3–5% annualized, on 50% OTM puts

If those numbers are accurate, the FD is the better deal. Same or higher yield, zero stock risk, zero tail risk, zero complexity. The put strategy is inferior on a pure risk-adjusted basis unless: - The 3–5% is on the cash collateral and your FD yields less than that after tax, or - You actually want to own the stock and would buy it anyway — in which case the put premium is genuinely additive, because the alternative (sitting in cash waiting for a limit order to hit) pays nothing

Buffett wasn't selling puts as a substitute for T-bills. He was selling them as a substitute for a limit order. If you would not genuinely buy the stock at the strike tomorrow without the premium, the trade doesn't make sense by his framework.

Great pushback. Let me find his actual words on the 10% price indifference and see if there's genuine tension with the Coca-Cola put trade.Let me take one more pass — looking for the actual source of the KO put trade story and whether it's even verifiable.Excellent — that last search turned up the critical finding. Here's the honest answer.

The KO Put Trade Is Real — And Buffett Himself Addressed It

A Gurufocus article references the transcript of Berkshire's 1994 annual meeting, where Buffett was asked about the Coke puts and answered directly. Here's what he said:

"We have not done that very often, and we're unlikely to do very much of it... I was happy to do it, and in that particular case, we made $7.5 million."

And then the crucial line:

"But we're better off, probably — if we like something well enough to write a put on it, we're probably better off buying the security itself."

That second sentence is everything. He's saying it was a minor, opportunistic trade — not a core investment philosophy. He also noted position limits constrained how much they could do, and that it wasn't meaningful to Berkshire's overall results.

So Is There a Contradiction?

You're right to smell one, but here's what's actually happening:

Buffett has said different things about price sensitivity depending on context:

1. "10% doesn't matter" — This comes up when he's talking about buying a wonderful business for the very long term. If you're buying a company you'll hold for 20+ years, quibbling over whether you paid 10x or 11x earnings is noise. He's said this repeatedly about Coca-Cola itself: he bought it in 1988, never sold a share, and the difference between paying 10% more or less at entry is dwarfed by decades of compounding.

2. The KO put trade — This was in 1993, when he already owned 93.5 million shares bought years earlier. He wasn't deciding whether to buy Coke or not. He already owned it. He was adding incrementally to an existing position, and the puts were a tactic to generate some income while waiting. The $7.5 million was 0.1% of Berkshire's market cap at the time. This wasn't a conviction call — it was a tiny, opportunistic yield trade.

These two positions aren't contradictory — they operate at different levels:

His real message is: if you're conviction-level bullish on a great business, don't let 10% stop you from buying it outright. The put-selling is a footnote, not a framework. He even said so: "if we like something well enough to write a put on it, we're probably better off buying the security itself."

The Most Important Point for Your Strategy

He also said the killer line in that same meeting: they couldn't do puts "in the kind of quantities that really would make it meaningful to Berkshire."

That should make you pause. If the man who ran one of the largest balance sheets on earth thought put-selling couldn't move the needle in size — and that just buying the stock was the better move — then building your investment approach around capturing 3–5% annualized on 50% OTM puts deserves serious scrutiny.

The FD is simpler, equally rewarding right now, and doesn't pretend to be a stock-picking strategy. If you want equity exposure, buy the stock. If you want yield, the FD is fine. The middle ground — selling way-OTM puts on stocks you don't urgently want — is neither fish nor fowl.

Here's what I can give you:

Primary Source

The original transcript of the 1994 Berkshire Hathaway Annual Meeting (Afternoon Session) — where Buffett answered the question about the Coke puts directly. This is the primary source.

Video + full transcript (searchable): https://financialtoolset.com/videos/kgKEiP6L9EQ/

Scroll to timestamp 02:49:20 — the section is titled "Coca-Cola Put Options Strategy."

Secondary Source (with exact quotes extracted)

The Gurufocus article that transcribed the exchange:

https://www.gurufocus.com/news/1157396/berkshire-hathaway-meeting-1994-afternoon-session

Key passage reproduced there:

"We have not done that very often, and we're unlikely to do very much of it... If we like something well enough to write a put on it, we're probably better off buying the security itself, and particularly since we can't do it in the kind of quantities that really would make it meaningful to Berkshire."

"On balance, I don't think it's as useful a way to spend my time as just looking for securities to buy outright."

A note on why you won't find this on berkshirehathaway.com: Berkshire posts annual meeting transcripts on buffett.cnbc.com (CNBC's Warren Buffett Archive), not on the corporate site. The Financial Toolset link above hosts the full video with a timestamped transcript. The 1994 meeting is also searchable at the CNBC archive directly if you prefer.