Discussion in 'Trading' started by lojze, Sep 2, 2005.
Example DAL, NWAC, ...
Call your broker. I was in this exact situation when Iridium went bankrupt, the broker (BofA) helped me to do a "phantom cover".
Why cover? You don't book cap gains if you don't cover.
Interesting concept - avoid taxes forever. Unfortunately we all know it doesn't work that way.
the stock you're short will still trade. soon there after its symbol will usually be changed in recognition of that. then ulitmately the company will go through bankruptcy proceedings. all the while you don't need to cover. usually its still trading .0001 etc. Unless you want to wait for tax reasons. it makes sense to just cover to close rather than sticking around to get the last .00001. Also note that filing bankruptcy doesn't mean that the stock can't rise against you dramatically.
Most hedge funds will cover the day after the announcement, causing a slight dead cat bounce. It's a good idea in my opinion, you've already made a killing, now you wanna avoid he taxes too? If only lightning struck twice
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