Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 159.40

-1.2%

3:59 PM EST

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To: DaveMG who wrote (59155)	1/3/2000 5:41:00 PM
From: Alan Bankman	Read Replies (1) of 152472

Interesting questions. Here are what I believe to be the answers. 1. You ask what if you back out of the hedge? I assume what you mean is you hedge, and then decide better of it. Let's assume your hedge is so complete that it eliminates all upside and downside. Then, I think the answer is the IRS says you sold the stock the day you hedged, and bought the stock back the day you eliminated the hedge. There are no regulations on this, yet, and the scenario you suggest makes a sympathetic case for ignoring the whole thing, but the logic of the particular statute gives you an unfavorable answer. 2. What if you write calls and the option is exercised after the 1 year holding period. So long as the writing of the calls isn't tantamount to a sale, you are ok. The call premium is added to the exercise price and that's your sales price. You get capital gain on the whole thing. When would the writing of the calls be tantamount to a sale? Only if they calls were tied to puts in such a way as to eliminate upside and downside (see my earlier post) or if the calls were deep, deep in the money when written (example -- write calls with a January 01 exercise price of 10).

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