Hello, I made a synthetic long position (buying call and selling put at same strike) on a stock at 275 strike price expiring January 21st, 2022. Stock is at around 210 which I think might be a bottom. It may or may not hit 275 by Jan 21st, 2022. But I want to add position now by buying more calls in future or adding stocks. Will it trigger wash sale rule now if I make new position knowing my current position will end up on loss on 21st January, 2022. Please advise. Thanks
Wash sale? No To have a wash sale you need to reverse your position so: 1-long...short...long 2-short...long...short If price closes below 275 your long call will expire worthless and your short put will be exercised. You'll be long 100 shares and none of your positions flipped long-short-long OR short-long-short. If you add to your position now with long calls or shares, you've never taken an opposite position.
To have a wash sale, you first need 2 transactions that result in a loss. So either buy then sell or short then buy. After the first 2 result in a loss, you would then enter the same position (with stock or option) as you originally had within 30 days. So your buy then sell would be followed with a buy. Now you've re-entered the original position (or similar option position). Now that you have the original position, you're not allowed to record the loss from the 1st 2 transactions. That loss will carry forward until you allow a 31 day period of no transactions in that position after closing. ***I should have stated it as "buy-sell-buy" rather than "long-short-long". ("short-close-short" for opposite) ***Your option trades don't close your bull position so no loss was created as you'll just have an open equity position that's in a loss since you purchased it @ 275.
You are stating After the 2 transactions in loss will result in wash sale. But wouldn't they say that I opened another long position just Before ( 30 days before) I would have loss in the coming synthetic long position? I mean my position will be closed in loss before 30 days of me entering in 3rd bull position.