Covered call writers are often Buy & Hope types who rationalize away the risk of the entire position by saying "I was going to hold the position anyway" whereas when they hear the word "naked", they wander into fear of unlimited loss or in the case of a put, underlying loss down to zero, not realizing that the R/R is the same for each position (on a 1:1 basis). In addition to the margin difference, there's the possibility of tax benefit on the CC side.
Yeah, I broke out 550 yesterday and it had my head spinning. I was able to construct arguments that would support the IRS claiming a short put on a closed long shares positions would constitute a wash sale, but I was also able to construe it in such a way that it wouldn't. Unlike any other area where you're interpreting legalese, when dealing with the IRS, ambiguity goes into the rule issuer's favor, not the part the rules are written against. I can say this, if you're talking about enough for the IRS to notice, you'll have to fight it. If it's small enough for them not to, it's not worth whatever you'd get if they did notice.
I suspect that the intent of the law would be to classify selling an ITM put after selling stock as a wash-sale. However, the two are not the exactly the same (they don't have the same risk : reward profile so therefore are only correlated 1:1 up to a point). I think there's enough grey area that the IRS / lawmakers never got around to figuring out how to implement the rule. If my broker doesn't call it a wash-sale, then maybe it's not something that the IRS would challenge. Because if they challenge that -- shorting a put that may never be assigned, then shouldn't they also go after what Wealthfront does -- selling 1 ETF to buy another blatantly similar ETF with the same exposure? Intent is the same in both cases and Wealthfront advertises their practice.
I'd still get that second opinion here. Not sure how much money is in play, but I'm willing to bet it's a lot less than the cost of the fight if they start asking questions.
A woman sees a psychiatrist for the first time and tells him: "I saw another psychiatrist and he said that I am obsessive-compulsive, neurotic with controlling tendencies. I want a second opinion !!!" And he replies, "I think you're ugly too!" OK, with apologies for that, https://www.greentradertax.com/ is a good source of trader tax information.
the premise of the question in the title is that one knows how to consistently profitably to trade the stocks and therefore in order to maximize the return wants to trade options on the underlying stocks i very much doubt the underlying premise... if i am right - u don't need options , if i am wrong - more so
%% Sorry i cant remember all the trash in my life- but that's life. I get a lot more out of STABH [Stock Traders Almanac By Hirsch] Modern Trader magazine reprints some of that. BUT with 1st 4 or 5 days, in month tending to be very bullish , + DEC being 2nd best of OCT-APR, in QQQ, XLK, SPY/+.No wonder some are selling- scale out. I hope PT Jones is right on 2017 being like 1999, nut i'm not that bullish this week= maybe later near ChrisTmas Trends
It's harder to make money buying calls vs. buying stock. It's harder to make money buying puts vs. shorting a stock. It's easier to make money selling puts vs. buying stock. It's easier to make money selling calls vs. shorting a stock. Reason why in all cases is because the premium changes your probability of receiving a profit.
not all short term option traders lose money, since sept 1 i have made 83 positive option direction trades in a row, i only trade spy simple calls and puts. since sept 1 i have made 75000.00 with an account starting at 48000.00. account is now 123000.00. i dont use indicators or exotic trades, just simple buying call and puts by price action. it can be done find a method that works for you and stick to your rules