SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: E_K_S who wrote (7977)8/23/1999 3:06:00 AM
From: Dogbert   of 15132
 
If you sell calls deep enough in the money to provide serious
downside protection, their premium in mostly intrinsic value and
little time value. In fact with deep enough in the value calls
the bid price may have negative time value. That means you can
easily be assigned, which I have, and suddenly you have a cap gains
tax bill to pay when your stock is taken. If you write 6 months out and every few months buy back then sell farther out, you have heavy transaction costs, bid/ask spread, plus commissions, for each stock you do this with. I did this once, won't try again. I like the short SPY or QQQ idea much better, I think it's cleaner.

Also don't forget that if you write deep in the money calls on
an underlying you have held less than a year, your holding period
is reset and you've got to start the clock over for a year if you
want 20% cap gains tax rates when you eventually sell it. Shorting SPY or QQQ doesn't cause this problem since you are not shorting a "substantially identical" security.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News