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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (669)	5/19/2001 8:27:13 PM
From: JGoren	Read Replies (1) \| Respond to of 5205

thanks for the post on wash sale rules. it appears that if you have to buy back calls at a loss to prevent exercise and sell further out, the effect is approximately the same as if you deducted the loss--by adding to the basis. this is impt to know for those of us who are writing just about every month.

To: Sully- who wrote (669)	5/20/2001 11:10:12 AM
From: JGoren	Read Replies (1) \| Respond to of 5205

if i read it right, because the amount of the disallowed loss is added to the basis of the replacement call, it merely delays recognizing the loss and so long as you close the second transaction either by expiration or buying back at a profit more than 30 days later and within the same fiscal year, it makes no difference. is that correct? for example, sell april qcom 60 calls at .50; price goes up and you buy them back before expiration and within 30 days at 3.00 for a 2.50 unrecognizable loss, while selling july 80's for 4.20. the july 80's would thus have a basis of 2.50, so if they expire worthless, the profit would be 1.70. or is the basis 3.00 (2.50 +.50)? but what happens if you have to buy back? if you buy back at 2.40, there is a .70 loss so long as you wait 31 days? analysis, comments?