Capital Loss on a covered call position

#4 06-20-2007, 01:29 AM

nickra <nickr...[at]gmail.com> wrote:

- quote -

> Say I own 1,000 of XYZ and have for a decade or so ago. Big
> capital gain, even withthe lower rate. Now, say I write some
> ATM calls, 10, for 1 each let's say they expire in three
> months, same tax year. My stock goes from 100 to 105 by day
> of expiration. Instead of letting the stock get called away,
> I buy the options back for 5. Now that is a loss (offset by
> the gain in my stock, yes.) So, do I take a loss on buying
> the options back? Any effect on the tax status of the stock
> I own?

Yes, you take a loss which doesn't affect the status of the
stock you own.

--
Ron

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

#3 06-20-2007, 01:29 AM

nickra <nickravo[at]gmail.com> wrote:

- quote -

> Say I own 1,000 of XYZ and have for a decade or so ago. Big
> capital gain, even withthe lower rate. Now, say I write some
> ATM calls, 10, for 1 each let's say they expire in three
> months, same tax year. My stock goes from 100 to 105 by day
> of expiration. Instead of letting the stock get called away,
> I buy the options back for 5. Now that is a loss (offset by
> the gain in my stock, yes.) So, do I take a loss on buying
> the options back?

Yes; unless you have other capital gains, only $3,000 of
your $4,000 capital loss is deductible against ordinary
income this year, the rest carries forward.

- quote -

> Any effect on the tax status of the stock
> I own?

No; you bought and sold (not in that order) a different
instrument entirely.

Seth

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

#2 06-20-2007, 01:29 AM

<nickravo[at]gmail.com> wrote:

- quote -

> Say I own 1,000 of XYZ and have for a decade or so ago. Big
> capital gain, even withthe lower rate. Now, say I write some
> ATM calls, 10, for 1 each let's say they expire in three
> months, same tax year. My stock goes from 100 to 105 by day
> of expiration. Instead of letting the stock get called away,
> I buy the options back for 5. Now that is a loss (offset by
> the gain in my stock, yes.) So, do I take a loss on buying
> the options back? Any effect on the tax status of the stock
> I own?

You wrote some covered calls and bought them back to close
out the position at a loss. Yes, that's a loss. Report it
as short term loss on schedule D.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

#1 06-18-2007, 01:27 PM

<nickravo[at]gmail.com> wrote:
- quote -

> Say I own 1,000 of XYZ and have for a decade or so ago. Big
> capital gain, even withthe lower rate. Now, say I write some
> ATM calls, 10, for 1 each let's say they expire in three
> months, same tax year. My stock goes from 100 to 105 by day
> of expiration. Instead of letting the stock get called away,
> I buy the options back for 5. Now that is a loss (offset by
> the gain in my stock, yes.) So, do I take a loss on buying
> the options back?

Yes; unless you have other capital gains, only $3,000 of
your $4,000 capital loss is deductible against ordinary
income this year, the rest carries forward.

- quote -

> Any effect on the tax status of the stock
> I own?

No; you bought and sold (not in that order) a different
instrument entirely.

Seth

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

06-18-2007, 01:27 PM

<nickravo[at]gmail.com> wrote:
- quote -

> Say I own 1,000 of XYZ and have for a decade or so ago. Big
> capital gain, even withthe lower rate. Now, say I write some
> ATM calls, 10, for 1 each let's say they expire in three
> months, same tax year. My stock goes from 100 to 105 by day
> of expiration. Instead of letting the stock get called away,
> I buy the options back for 5. Now that is a loss (offset by
> the gain in my stock, yes.) So, do I take a loss on buying
> the options back? Any effect on the tax status of the stock
> I own?

You wrote some covered calls and bought them back to close
out the position at a loss. Yes, that's a loss. Report it
as short term loss on schedule D.

--

ArtKamlet at a o l dot c o m Columbus OH K2PZH

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ------------------------------------------------------- >

#-1 06-12-2007, 05:06 AM

Say I own 1,000 of XYZ and have for a decade or so ago. Big
capital gain, even withthe lower rate. Now, say I write some
ATM calls, 10, for 1 each let's say they expire in three
months, same tax year. My stock goes from 100 to 105 by day
of expiration. Instead of letting the stock get called away,
I buy the options back for 5. Now that is a loss (offset by
the gain in my stock, yes.) So, do I take a loss on buying
the options back? Any effect on the tax status of the stock
I own?

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

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