Shane, I do some tax management with my options trades and the strategies. For one thing, if a strategy can be done in my IRA, that is where I do it. If I do a strategy in a regular account, I ALWAYS look to see if there is an alternative in futures or futures options first. Futures gains and losses are always taxed as 60% long term and 40% short term. That cuts taxes fairly strongly. The same is true for collateral. I am more likely to own a foreign bond or a Treasury or a bond fund in an IRA and more likely to use tax advantaged closed end fund preferreds or even tax free munis in my taxable accounts.
When you swing for the fences, as in 90/10, transaction costs are a mosquito buzzing around your head and not part of the main event. I try to reduce them as much as possible, but, going for quadruples, 1/2% or 2% costs are nowhere near getting the name and the timing right. Give me a Micron Tech put when the stock goes from $95 to $17 or a BMC Software that has a similar move and I don't really focus much on the total commission costs or whether I paid the offer and sold at the bid. I think the big grin on my face closes off the cheapskate part of my brain.
I tend to give equities a longer holder period simply because they are not going to expire (I hope) on me. Options and futures have to be dealt with during a defined period of time. So, I am more likely to roll or close an option position than I am to take profits quickly on a stock.
Buy and hold has never been my cup of tea. I like being in cheap with my long stocks, bonds, calls and futures and being in puts on expensive. As the market moves, that relationship changes. For example, HGSI was dirt cheap in the mid teens. I still think the co. is terrific, but in the 60s, it is too pricey for me. A buy and holder would say that since I like the co., I should hold on. They may have a point, but I have trouble doing that when I see another bio stock I like cheapening up and that HGSI money can be put to work there. This decision is also impacted by whether the position is in the IRA or taxable account.
I do have one buy and hold stock, though a true buy and holder would consider it a trader, as I've increased and decreased my holding in it many times over the centuries. I bought Medtronic in the 1960s and, though it has been overpriced many, many times since then, I have always held on to some of it just to see if that was a viable strategy for me. The jury is still out. MDT has been fabulous, but it is the 1 in a 1000 stock that could have been held for outperformance during that period. I think picking the 1 in a 1000 stock for the long haul is MUCH harder than picking many for the short haul. Then again, I also get bored quickly. <g> |
