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Non-Tech : The Critical Investing Workshop
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To: Neal davidson who wrote (9227)3/26/2000 1:02:00 AM
From: Dr. David Gleitman  Read Replies (1) of 35685
 
Morning Neal:
re:
<<Another thing that you can do is to place an order to buy additional stock on friday of options expiration and let them take out these new shares at a
higher price.>>

David (and others): Are you sure you can do this? My buddy, who has an LLM in tax from NYU says this is not legal. (He's been wrong before, however).

with regards to buying additional stock for the purposes of having those shares taken, I was taught this strategy when I attended an Options seminar sponsored by the CBOE. The speaker/lecturer who was from the American Stock Exchange actually provided this suggestion as a strategy. When you are going to be called on options expiration, they don't care which shares you are taking from. All that they want, and that you are obligated to supply them with are the number of shares. This info came from him, It's good enough for me.

Re:

Second, as long as we are on the topic of taxes: I bought ELON at $54. I have been selling OTM calls ever since (ie: on Wednesday of this week, when
ELON was in the mid 80's, I sold the April 110's for 6 3/8--too good to pass up). Anyway, do I have to take gains on every single covered call that expires
worthless? OR, can I use the proceeds of the covered call to reduce my basis in the additional purchase?

While I am not a tax expert (but I play one on TV <g>), It is my understanding that these are treated as capital gains.

Hope this helps.

David
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