The wash sale rule and short OTM put

Discussion in 'Professional Trading' started by nimo2007, May 17, 2008.

  1. nimo2007


    Hi everybody,

    Last year I made a blunder doing a tax loss selling, and right now i'm trying to fix the situation. I would appreciate it very much if anybody with knowledge on the wash sale rule would answer my question below.

    On Dec 30 2007, I sold MER for a loss (tax loss selling) and then a 2 weeks later I sold a OTM put on MER. At that time, I didn't realized that the loss on MER was disallowed because of the wash-sale rule, even though the put option was never exercised. The rule says: if within 30 days after I sell my stock (for a loss) I enter an OTM put on the same stock, then the loss is disallowed.

    My question is: right now, which is almost 6 months into 2008, if I buy back the same amount of MER shares, can I still use the disallowed loss to calculate the cost basis for these "replacement shares"?

    Thanks very much.