I havent looked at tax trades in a long time,but there may be some sort of tax code which defines the minimum % strike level one must sell that does not negate the long term holding tax advantage
I'm not up either. Last I knew, deep ITM writes are labeled unqualified and can stop the stockâs holding period or create a straddle resulting in negative tax consequences. Deep ITM is anything below the highest strike below the underlying's price unless the option is for more than 90 days and the stock is over $50 then it's anything below the second highest strike. The tax code is a freakin nightmare.
Personally, no...but I don't want to do the original trade either. I just threw it out there for comparison.
Why sell ANY naked puts? Why take an unlimited risk for a defined return? I know it can be done and there are good methods to do this but you REALLY need to know what you are doing.
Why? Because I want to go long a stock but it is not trading at the price I am willing to go long the equity? So instead I collect a premium while wait for my stock, and if I do not get the stock then I can chose to write another contract? naked put is not unlimited risk, naked call is unlimited risk.
Buy-writes, while identical to short puts, are perceived to be less risky than short puts in the media. They imply a kind of "I was going to own the stock anyway" kind of logic.