The Covered Calls for Dummies Thread Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Covered Calls for Dummies Thread

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: FaultLine who started this subject	5/7/2001 6:54:52 PM
From: FaultLine	Read Replies (3) of 5205

Tax Implications for Deep ITM Covered Calls While reading the IRS Capital Gains and Losses document today irs.gov I ran across some complicated rules concerning exercised covered calls that are "too deeply-in-the-money". This is also carefully discussed in McMillian's Tax Chapter on pp.812, ƒƒ. Basically, if the call you have written is "too deeply-in the money" then, if exercised, the holding period you have accumulated on the underlying stock is suspended while the transaction was open or even eliminated (reset to zero). I presume that this is because you are realizing some of the gain from the underlying stock. Anyone interesting in this topic? I think you must have McMillian available for us to discuss this as it goes on for pages (and is summarized in Appendix E). Also, did you know that you can buy and deliver "new" stock to satisfy an assignment rather than cough up the original low basis securities with high capital gains problems on which you originally wrote the call? It is true. Another good reason to have some freedom-of-action-cash around. --fl

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next