The Covered Calls for Dummies Thread Message Board

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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: FaultLine who started this subject	5/16/2001 12:32:39 PM
From: StockHawk	Read Replies (2) of 5205

Hello everyone, this is my first post on this board, and I have not read too far back, so forgive me if this has already been discussed. I'm investigating unexpected call assignments, and it relates to this line in the thread header: "--Mike Buckley and Dale Russell have suggested we mention that when a stock showing a paper profit is called in a taxable account there are tax consequences" This is the scenario: You are long a stock that has a low tax basis that you do not want called. You sell at the money call options against the stock and the stock price rises. You plan to cover and roll out (and perhaps roll up) but before expiration, and before you act, you get an assignment. Since you don't want to lose your low cost basis stock and pay the taxes you immediately buy back the shares. Then you instruct your broker to use the new shares to settle the assignment. Has anyone ever done this? I spoke with two reps at Dreyfus. One told me this could be done, the other said it could not. A rep at Waterhouse said it could. StockHawk

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