Warren Buffett used to speculate in options and futures

Warren Buffett is known for being a legendary investor. He is known as a proponent of value investing, and for decrying the rampant speculation and gambling by self-proclaimed "investors". Value investors spend countless hours studying his techniques, and reading his partnership letters. However, did you know that Warren Buffett used to speculate using derivatives such as stock options and commodity futures? I found out about this interesting tidbit from Buffett's biography — Buffett: The Making of an American Capitalist by Roger Lowenstein. On Chapter 12:

In the late seventies, he bought a few stocks for his own account. He was a bit more of a swinger with his personal money. For instance, in the case of Teledyne, Buffett invested in options — a strategy with a higher chance of either failing or making a killing. According to one associate, he also bought copper futures — an outright speculation.

Teledyne options, copper futures… Hmmm… This was in the late seventies, and it was for his own account. Buffett is known to invest using his own account to supplement his relatively small yearly salary as CEO of Berkshire Hathaway. For context, Buffett first started buying Berkshire Hathaway stock in 1962. By the late sixties, Berkshire Hathaway expanded into the insurance industry. The late seventies was when Berkshire acquired an equity stake in GEICO.

I guess it doesn't hurt to speculate in the financial markets, as long as one is aware that one is speculating and not investing. Even Warren Buffett speculates! Intelligent speculation could be profitable on a long term basis, but it is not for the faint of heart. The danger from speculation comes from the lack of distinction between intelligent and unintelligent speculation, and from the higher risk that one is subjected to by speculating instead of investing.