Bullish Options Setup and Block Trades Signal Strategic Entry for BRK.B Amid $10B Petrochemical Deal

• BRK.B trades at $497.11 (-1.12%), with a short-term bullish engulfing pattern and MACD crossover above signal line.
• Put/Call OI ratio of 0.61 favors calls, with top OTM calls at $505, $510 and puts at $495, $480.
• Massive block trades in $520–$530 puts (total $5.8M turnover) suggest institutional hedging ahead of the Occidental deal.

Core Insight: Despite a short-term pullback, technicals and options data signal upside potential as Buffett’s $10B petrochemical acquisition validates long-term bullish sentiment. The stock is poised to test key support/resistance levels amid mixed near-term positioning.

OTM Call Dominance and Whale Put Accumulation: A Tale of Two Sentiments

The options market for BRK.B reveals a call-heavy bias in the short term, with the top OTM call open interest concentrated at the $505 (2,088 contracts) and $510 ($1,122) strikes for Friday expiration. This suggests retail and institutional players are pricing in a potential rebound to retest the $500–$510 range, which aligns with the bullish engulfing candlestick pattern and the 30D moving average at $494.84. However, the put/call OI ratio of 0.61 (calls: 285,005; puts: 174,050) indicates a structural imbalance, with bears hedging via the $495 (3,543 OI) and $480 (967 OI) puts.

The most striking anomaly is the block trading activity in deep OTM puts expiring in September 2025. Four separate trades totaling $5.8M in volume occurred in the $520–$530 put strikes (e.g., BRKB20250919P525 with 880 contracts traded). This suggests institutional hedging against a potential earnings or regulatory risk event, possibly tied to the Occidental deal. While the calls imply confidence in the stock’s near-term recovery, the block puts highlight downside caution from large players.

Strategic Petrochemical Acquisition Validates Bullish Options Flow

The $10B Occidental Chemical acquisition is a game-changer for BRK.B’s industrial portfolio. This move, confirmed by Bloomberg and Barron’s, aligns with Buffett’s long-term value-creation strategy and could drive earnings growth in the petrochemical sector. The news dovetails with the call-heavy options positioning, as the deal’s execution would likely push the stock above the $500 psychological level.

However, the recent CEO transition and BYD divestment introduce uncertainty. The 9% drop post-Buffett’s CEO announcement (per Insider Monkey) contrasts with the 10% YTD gain reported by Zacks. While the petrochemical deal is bullish, investors must monitor regulatory risks and tariff policy shifts (as highlighted in Barron’s analysis) that could pressure the stock.

Actionable Trade Ideas: Leveraging OTM Calls and Strategic Put Hedges

For Options Traders:

• Buy the $505 call (Friday expiration) at the bid-ask midpoint (~$10–$12). This strike has the highest open interest and aligns with the bullish engulfing pattern. A break above $505 could trigger a cascade of call buyers.
• Consider the $510 call (next Friday expiration) as a longer-term play if the stock holds above $493.51 (30D support). Target a 15–20% move to $515–$520.
• Hedge with the $495 put (Friday expiration) at $8–$10. This provides downside protection if the block traders’ bearish bets materialize.

For Stock Investors:

• Entry near $493.51 (30D support) with a stop-loss below $490.14 (200D MA). Target $505–$510 as the first resistance cluster.
• Scale in at $490.14 if the stock tests the 200D MA, using the $495 put as a trailing stop.

Volatility on the Horizon: Balancing Bullish Momentum and Strategic Hedging

BRK.B’s near-term trajectory hinges on three factors: execution of the Occidental deal, regulatory clarity on tariffs, and Greg Abel’s leadership. The RSI at 68.63 suggests the stock is not overbought, leaving room for a rebound. However, the Bollinger Bands show the stock is trading near the middle band, indicating a potential breakout phase.

Traders should watch for a break above $505 to confirm the bullish case, while a close below $493.51 would validate the block traders’ bearish positioning. The MACD histogram’s positive divergence (0.29) adds to the case for a short-term rally.

In summary, BRK.B offers a high-conviction trade for those willing to balance the bullish catalysts (petrochemical deal, Apple stake increase) with the bearish risks (block puts, CEO transition). The options market has priced in a 15–20% upside potential by year-end, making this a compelling setup for both directional and volatility-based strategies.