Taxable amount of a ShortSale

Discussion in 'Taxes and Accounting' started by Quanto, Feb 26, 2024.

  1. Quanto

    Quanto

    How do you then explain the case that unsettledCash is 0 when ShortSelling a Call?
    As said the broker calcs it only when a ShortPut trade gets opened, but not for ShortCall trades.
    Can you think of any logic in this? :)
     
    #21     Mar 8, 2024
  2. BMK

    BMK

    Aren't you trading in a cash account? No margin?

    So the only way you could sell a call is if it is covered, either by a long call of a different strike/expiration (a spread), or a long stock position.

    If you are long the stock, then you don't need any cash to sell a call.

    If you are doing a spread, that involves a short call and a long call, you don't need cash the way you need it with a short put. With a short put, you have to have the full amount of cash needed to buy the stock (minus the premium you get from selling the put, if the broker allows that).

    When you do a spread involving long and short calls, you only need the difference between the strikes. It's a very different formula.

    Your short puts are cash secured. That's why that cash is on hold.

    A short call is not cash secured. It's something else. LOL
     
    #22     Mar 8, 2024
  3. Quanto

    Quanto

    @BMK, the ShortCall case is this: CoveredCall combo order for opening both the underlying stock (as long) as well the ShortCall "at the same time". Yes, in a CashAcct.
    The collateral here is StockPrice - Premium
    (that at least is done correctly by the broker :)).

    Btw, with CashSecuredPut the collateral should be Strike - Premium, but the broker does (IMO wrongly) Collateral = Strike.

    PS: by Collateral I mean the InitialRequirement to be able to place the order.
     
    Last edited: Mar 8, 2024
    #23     Mar 8, 2024
  4. BMK

    BMK

    If you are long the stock, then you don't need any cash to cover a short call. The short call is covered by the stock. That is why there is no unsettled cash when you sell a call.
     
    #24     Mar 8, 2024
    Quanto likes this.
  5. Quanto

    Quanto

    Hach!
    Today opened a new CSP, and unsettledCash now remains 0.0 !!! :)
    Either they now have fixed it finally, or this error happens "spuriously"...

    Reminder: in prev. postings above I had reported from exactly such a case, ie. CSP caused unsettledCash to become > 0.0.
    As said today it did not...

    Update:
    Now I increased the qty to 2 at same premium $0.85 (and same strike 3.0). After this 2nd fill the unsettledCash has moved from $0.0 to $104.62. I try to find any logic in this and try to figure out this value...
     
    Last edited: Mar 18, 2024
    #25     Mar 18, 2024