Haha, I guess I am being forced to do options (or to begin study at least) afterall, something which is entirely foreign to a novice.
Question. Even if I implement this collar function, my margin call problem still exists if there is a market downturn which triggers it. Does it not?
What do you mean when you say that a stock position "will become long in month x"? How can a stock position change from short into long without any selling or buying?
What I meant of the lot being short or long at the specific date was the capital gain tax characterization of the lot. Perhaps my use of the nomenclature was incorrect. Keep in mind I do not know anything about options trading. I will have to pay 40% captipal gain tax if I sold a particular lot within a year of purchase, in my elevated tax bracket. 20% if I held it longer than year.
Being that your interest in options is to protect gains until 7/18 (when you've held the stock for 12 months), I'm going to advise you contact a tax expert. While I'm no tax expert (so this info may not be correct), but I believe that if you purchase a put option to protect your losses that the time you hold the put option would not count towards the 12 month capital gains holding period. As such, you have roughly 5 months remaining -- if you purchase an option that expires in 5 months, then come 7/18 you will still have 5 months remaining for it to be taxed at capital gains rate. In short, you only get the capital gains rate if your investment is at risk for 12 months. The time you hold the put option means your investment is no longer at risk and that time doesn't count. So you held for 7 months, if you buy and hold a put for say 3 months, you would then need a total of 15 months holding the underlying to get the capital gains rate (7 months at risk, 3 months not at risk, 5 months at risk again). Again, I'm no tax expert and the nature of my trading has no concern for capital gains rate, but I think that you should investigate this more thoroughly before making the assumption that a put is appropriate and find out far too late (after you've sold in 7/18) that you actually got the regular income rate rather than capital gains.
Being long a protective put negates the tax benefits. Basically it pauses the clock on short term vs long term gains (and actually, the tax code isn't explicit about this but defines it in terms of risk...so arguably far OTM puts may not, but moot point really). A risk reversal (collar) absolutely stops the clock on long term gains as does am ATM put. You can still do FIFO to sell your oldest shares first to bring your exposure down while getting the tax benefits on your newest by holding. And remember to calculate both your interest and your cost of risk (implicitly, the cost of an ATM put expiring on your tax anniversary) against your marginal tax rate. And remember, a big tax bill (that you expect) is a good problem to have.
The bull market is over for this decade. All your decisions should have that in the background. You've had a nice ride, but all things come to an end. Pigs have been fed, but now hogs will get slaughtered.
Not on stock C but could be if the total is breached. Your gain/loss on stock C will be capped no matter what.