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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mathemagician who wrote (41311)	4/2/2001 1:45:01 PM
From: que seria	Respond to of 54805

Aside from the IRS's view of the LT nature of the holding period, a deep ITM covered call nets you a LT gain only on the difference between your basis and the strike price--that being what you sold the stock at if called away. So if you're sitting at 60 with a basis of 20 after 6 months and want to preserve the gain, selling a CC with a 30 strike gives you a fat option premium that is ST, and only 10 points that is LT. To me that is a more basic problem than the IRS rejecting the holding period as illusory--a logical response I've not looked into. Losing most/much of your tax break while still facing the very market exposure you're trying to minimize to get the tax break is what's kept me from deep ITM CC writing. I'd either sell the position or harvest monthly income on CCs and be ready with stops.