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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: BDR who wrote (3147)12/18/2001 5:30:30 PM
From: Dan Duchardt  Read Replies (3) of 5205
 
Dale,

I think we read it differently. I can't seem to cut and paste the section I am reading, but it is on page 6, the middle two paragraphs. Sure sounds to me like the sale is an event that causes the underlying to be treated as sold and repurchased, so that would have to be recognized in the tax year of the sale, long term or short term depending on how long you had held up to that point. Then you would have a covered call position with a new basis and new holding period for the underlying that carries forward.

Of course the whole thing is still very vague about what is or is not a constructive sale. There used to be a section at CBOE that had guidelines for how far ITM you could go. Seems this pamphlet has replaced that, suggesting that Treasury regulations will cover it. Who knows when.

Just another opinion based on my reading. I'm not a tax pro nor an expert on this subject.

Dan
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