Thank you for reaffirming my view that you are definitely not qualified to be the gatekeeper of an Option thread which in itself is a complex subject. Your double standard is what I object: you encouraged sinical juvenille comments by a certain individual and participated, and yet you object strong worded answers from Edamo, which between him and RocketMan would have not escalate if you had not interfered causing prolonged heated exchanges. When you participate and encourage in juvenille postings, you are drawn down to that low level, which sadly I do notice extracted your discarded immaturity to the surface.
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You can't purchase naked puts, PAL.
Lesson No. 101: It is given that the terms naked puts or covered calls imply the short side. Taxwise: if you are short on options, and made gains - providing it is not assigned - the profit is always treated as ordinary income regardless how long you are short.
You never say "I buy naked puts", you simply say " I buy puts", and you never say "I buy covered calls", just simply "I buy calls" because it does not matter to the buyer whether the options are covered or naked.
Taxwise: If you hold a call and sell it more than 1 year later, the gain is a long term capital gain, contrast that to being short on a call specified above.
The tax treatment is entirely different if you excercise the option or if you are assigned. Depending upon whether it is put or call, the proceed or cost of the option is incorporated to the cost/proceed of the stock. How long you have the option is immaterial since the basis is the the stock itself.
Example: You buy Leaps dim call Jan02/csco. Consider two scenarios:
a. After 1 1/2 years you sold that for a profit. The gain is l/t capital gain.
b. After 1 1/2 years you exercised your option and the next week you sold the stock for a gain. You don't report as two transactions as many people would like, i.e. reporting your option gain to the IRS as l/t capital gain and the stock gain as ordinary income, but instead you have to report as a single transaction, i.e. ordinary income for the stock held for one week where the cost basis of is increased by the cost of the option. To no one surprise, the IRS gets more using its formula.
Should you need more, feel free to ask. |
