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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (7984)	8/22/1999 8:37:00 PM
From: Boca_PETE	Read Replies (2) \| Respond to of 15132

Eric S: Thanks for your quick response to my question. I guess my only way of protecting the current value of my 401K shares of my employer is to sell short similar stock in a taxable account and be liable for the dividends until I close out my short position. P

To: E_K_S who wrote (7984)	8/22/1999 9:06:00 PM
From: MrGreenJeans	Respond to of 15132

Eric, Not Exactly In summary, as far as I can tell, the only reason why you would want to hedge an equity position would be to (1) postpone the long term capital gain tax event, (2) continue to hold a stock with excellent long term potential and maintain your long term cost basis (ie. asset held over 360 days) or (3) protect a short term capital gain with the intention to convert to a long term capital gain thus incurring a lower tax rate. There are some hedging strategies such as shorting against the box for prolonged periods, for example for more then 10 months of the year depending on when it is put on, and the use of "collars" which can change your long term capital gains into short term gains. In the case of a collar certain parameters must be met as to which calls and puts may be used. In short, if the IRS deems your strategy to be tax avoidance your capital gain status changes from long to short term.