spread tax

Discussion in 'Options' started by tentenequals20, Jan 20, 2007.

  1. Hi,

    I bought a call spread. One set of contracts bought for a stike price of $60 and another sold for a stike price of $70.

    when the stock price went higher, I bought back my $70 stike price option for a loss and kept riding $60.

    Now sold $60 strike price as well for a good profit.

    I assume I can't buy the options on this security again because of the wash rule on the loss I took on @70 contracts?

    pls help
     
  2. gkishot

    gkishot

    Didn't you sell @70 contract before, bought it back and now you want to buy it again which is reverse of your original sell? I am not a tax expert but in my mind your situation is not the same as buying a stock, selling it at loss and then buying it again that produces a position which is effectively equivalent to the original.
     
  3. spindr0

    spindr0

    The wash sale rule will only affect you if you sell at a loss in December and then buy it back in January or if you hold open positions in shares (or options) at the end of the year that have accumulated wash sales.


    If everything is closed by year end, it will not affect you. So trade merrily all year long! :)
     
  4. Spin, good answer to a tough question.

    Bob
     
  5. thx, Spin.

    btgw, I remember seeing you in yahoo option boards a long time ago. if you're the same person, always enjoyed your posts.
     
  6. spindr0

    spindr0

    Yep, I am one and the same, formerly of Yahoo which has gone into the crapper. Now I am here, trying to soak up the ideas and concepts of the many, more experienced traders that post here. Thanx for the kind words.
     
  7. I would like to add one more thing about the Wash Sale rules.

    Even where the Wash Sale rules act to disallow one's loss, it is not a permanent disallowance. It is merely a timing difference. The reason is that the basis of the replacement stock is increased by the amount of disallowed loss under the Wash Sale rules.

    So, as Spin correctly said...just keep on trading.

    Good luck.

    Bob