Larry Shapiro <lshapiro[at]panix.com> wrote:

- quote -

Options are substantially identical to their underlying stock.

But options of different strike prices or expiration dates are
not substantially equal to each other.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Would the following transactions constitute a wash sale:

11/15/03 - Hold 500 shares with an unrealized loss.
11/15/03 - Buy 5 in.the.money call options.
12/26/03 - Sell the 500 shares at a loss.
01/15/04 - Exercised the options to buy 500 shares.

I have not seen anything on wash sales involving exercised
options, but I suspect the above WOULD constitute a wash
sale, since the rules are pretty machanical.

If the above transactions are a wash sale, then in reality
you would have to meet the 60 day test twice. Once for the
options and again for the exercised of the options.

The above transactions do not defy the spirit of IRC 1091
since you are at risk for more than 60 days, but they might
defy the literal language of the wash sale rules. From an
economic viewpoint the exercise of the options is really a
conversion of an option position to a stock position and not
a totally new position. Unfortunately, the holding period
of a stock position does not include the option holding
period.

Any opinions appreciated.

Thanks

Sanity is Statistical --- George Orwell
Statistics are insane --- Me

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