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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: FruJu who wrote (11396)	8/19/1999 3:58:00 PM
From: Herm	Respond to of 14162

You are technically correct about the impact of taxes on CCs as income (short term tax). But, keeping tabs of your net cost basis (nut) should is an important bookeeping necessity and should be kept simple in order to quickly calculate "what-ifs" situations. I do that myself. Money in and money out is the raw number I seek. I don't worry about the taxes. In my particular case, I just increase my tax shelter contributions at work when I see a windfall of income beyond what I need to maintain my normal standard of living expenses. Our tax shelter allows us to take loans against our accounts and slowly repay back at a 5% within 5 years and 8 years for the purchase of a primary home. So, I'm paying myself when I shelter my income taxes from CC income. In short, the more CC income I have, the more I will plow into the tax shelter to offset the income taxes.I can pay Uncle Sam or I can pay myself. That is a no brainer. I can pay 5% for a loan from myself IF I need extra cash and I can shelter the CC income and save a min. of 17% income tax each year. That does not include the fact of how much is generated in the funds. Janis Capital Appreciation cranked out 45% last year. One heck of a ROI. So, the occasional loans are a drop in the bucket compared to the legal laundering process (contributing to the tax shelter) and the resulting capital appreciation investment growth. One final note! Astute investors with large equity in their homes could tap their equity and increase their cash flow. The process involves extracting SOME of the equity in the home on paper, investing it correctly, then CCing to generate cash. When executed correctly the CC income will more than pay for the tax deductable equity credit line interest and the extra income taxes. Beating a 7% to 9% annual net interest rate on an equity loan is fairly easy. A good CCer with the right stocks should be able to crank out 25% to 35% year after year even in a down stock market.

To: FruJu who wrote (11396)	8/19/1999 11:24:00 PM
From: KevinD	Read Replies (1) \| Respond to of 14162

I guess you could consider taxes but I don't. I don't see taxes as part of the gain or loss but as a consequence of the gain or loss the same as on the stock play. I don't look at a doubling in price of a stock I bought as a 60% gain because I have taxes to pay. It is a 100% gain that I am thankful that I have to pay taxes on, although I wish it was not 40%. I remember all too well, the times when I owed little in taxes and I really don't want to go back there. I would much rather deal with the problems that go along with owing a lot of taxes.