On Mar 26, 9:00 pm, jumper <caf...[at]gmail.com> wrote:

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Was the strike price $17, and cost on day of assignment greater than
$17? If so, then I'm guessing that the cost date is the date your
bought those 1000 shares, cost basis is the price you paid for the
shares, sale date and price is the 7/20/07 details above. But where
does the income from selling the options go? I'm guessing it would
also go Schedule D - sale details is the 5/2/07 stuff above, and
purchase date is none. So you would have 2 sets of positive income --
the first possibly long term, the second definitely short term.

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Sorry, no idea what a straddle is.

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Confusing, how can you buy back something that expired?

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You mean you sold calls short? If so, then it looks like an ordinary
Schedule D item.

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Technically the wash sale rule applies on #2 (loss on 5 contracts is
disallowed as > =5 contracts where purchased 30 days before or after
the event). The disallowed loss is carried over to #3. As #3 was
closed out by the end of the year, it doesn't matter how you report it
as the total comes out the same.

But pay attention to Rich's comments. Trading in your own company
stock (day trading, short sells, calls, puts, short calls, short puts,
etc) may be disallowed, and could even raise trouble with the SEC.

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jumper <caftaa[at]gmail.com> writes:

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[snip]

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[snip]

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[snip]

This isn't a tax note but rather a (quasi-) legal/practical one:
(1) Many companies have policies against employees
selling the company stock short, writing calls,
buying puts, etc. or any transaction where the
employee makes money from the company stock
going down. Have you verified that your trading
actions don't violate company policy?

(2) Many companies have blackout policies that prohibit
employees from trading in company stock *or derivatives
thereof* during certain periods. Again, gave you verified
that your trading actions don't violate company policy?

--
Rich Carreiro rlc-news[at]rlcarr.com

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<< ------------------------------------------------------- > << 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. > << ------------------------------------------------------- >

#1.
I wrote some covered calls on my ESPP shares (qualified dispositions)
in 2007. These calls got assigned. I guess I just need to add the
premium to the total stock sale price and follow the regular process
to split Ordinary Income and Long Term gain on this ESPP sale while
reporting the taxes?
Here are the covered call details:
# of ESPP stocks = 1000 (purchase price= $10)
5/2/07- sold 10 covered calls, Expiration July/2007
7/20/07 - Got assigned and 1000 stocks sold at $17 each

So, I just need to enter long term capital gain in schedule D and
ordinary income(15% discount) in 1040. Do I need form 6781 here? I
assume these are qualified covered calls?? Please advice.

#2.
I bought back the covered calls (sold on ESPP stocks) at a loss. Do I
just need to enter this as a long term capital loss in Sch D?
details:
# of ESPP stocks = 500
5/31/07- sold 5 covered calls, Exp Oct/2007
10/17/07- bought back these calls at a loss
Do I need to report any thing on form 6781 here?

#3.
I sold 10 naked calls (of the same company as ESPP stock but this time
not a covered call but a Naked one) and bought them back on the same
day at a loss. I guess this is not a Wash sale. Do I just need to
report this as short term capital loss in Sch D?
details:
10/17/07- sold 10 naked calls
10/17/07 - bought them back(or closed) at a loss


When you look at #2 and #3 above, there are 3 activities on 10/17/07.
Am not sure if FIFO/LIFO rule applies here in matching the
transactions across #2 and #3.


In summary: I did enough research on the net on this. I was confused
if I really have any Straddle situation above that may require form
6781 in any of 3 cases above. I also read that any capital loss in
above situations requires the use of form 6781. Appreciate your
inputs. I will still continue my research on this topic.

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<< ------------------------------------------------------- > << 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. > << ------------------------------------------------------- >