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Non-Tech : Paired Trades and Hedging Strategies
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To: Nancy who wrote (22)10/15/2004 10:31:47 PM
From: Biomaven  Read Replies (1) of 136
 
but the proceeds go to reduce your cost of holding.

Depends on whether the stock gets called away or not. If you simply buy back the option, there will be a short-term cap gain or loss. If the option expires worthless, you will have a short term cap gain in the year of expiration. If the stock gets called from you, then you add the premium you received to your basis in your stock - whether you have a short or long term gain/loss depends on your holding period in the stock. And note my previous response - your holding period in your stock can get tolled if you sell an in-the-money covered call.

Peter
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