Walter:
Hello! I've been on vacation, so please forgive the delayed response.
The answer to your question is yes AND no. If you are talking about
a tax standpoint, the answer is NO. You will realize a loss when you buy back the option for more than what you sold it.
The "yes" part comes in IF/when you sell another option for more than
what it cost you to buy back the original one.
Here is a REAL example that happened to me to clear this up.....
I sold 10 Dell Computer March 150 puts. I received $6300.00 .
Dell went in the tank after it split. I had to buy back those puts
for $12,620.00 . (ouch!) At the SAME TIME, I sold the DELL August
75 puts for $16,000.00 (DEll split so the price was adjusted.) SO, while I was taking a loss on the initial position of $6,320.00, I was
taking in roughly $3,380.00 more in cash. Mind you, I am STILL
obligated to buy 1000 shares of Dell at $75.00 . But, I have until
August for the price to go up, and I have $3,380.00 more in my account
than I would have if I had just sat there & received the Dell in March.
This is my own personal specific real life example. This is NOT in any
way a recommendation to anyone to do anything!
As I noted in that post, or one very close to it, the entire exercise
began with me saying.."Oh No! How am I going to get out of this mess?"
That is not a position anyone tries to get themselves in, nor is there
ever a sure way out of it. The final card has not been played, and I am far from out of the woods.
Please pardon the long explanation, but the last thing I want to do to anyone is give them the idea that there is anything that even remotely resembles a "sure thing". There is not.
Best Regards,
Doug |
