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Strategies & Market Trends : Option Spreads, Credit my Debit

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To: jjs_ynot who wrote (1795)	11/25/2000 10:18:56 PM
From: KFE	Read Replies (2) of 2317

Dave, Can you tell me the correct tax treatment for options that roll over to the new year. I am particularly about the treament of options that I am short that I expect to expire worthless in Jan. and Feb. I am assuming that you have not claimed trader status so any short options that are outstanding at year end would not have any implications on your 2000 tax return. You would not have any tax consequences until they either expire or are covered or assigned and sold. The exception to this would be if they were index options that are considered section 1256 contracts which have to be marked to the market at the close of the last trading day of the year and considered sold or in the case of short options bought at that time. All broad based cash settled index options are section 1256 contracts (OEX,SPX,NDX etc.). No opinion by the IRS has been issued that I am aware of on the unit investment trusts such as QQQ as to whether they are section 1256 contracts. Remember all section 1256 option trades are 60% long term and 40% short term regardless of whether held long or short unlike standard options where short options can never be long term even if held longer than one year. Regards, Ken

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