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

To: JGoren who wrote (688)	5/21/2001 7:21:41 PM
From: Sully-	Read Replies (1) \| Respond to of 5205

Hi JG, "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? " However, it appears there is no problem with the original loss. I would think that your first transaction was an allowable loss. It would be no different than buying a stock & within 30 days selling for a loss. The original purchase cannot also be the replacement shares, no? To try to answer your question, let's assume the CC buy back did result in a Wash Sale with a $2.50 unallowable loss. I would think that you could add that $2.50 to the cost basis of your next CC purchase (same strike & month I would think). I don't use my CC's in that manner. I use the CC's to affect the cost basis of the underlying shares. If I had a CC that I later bought back at a loss, I would then add this to the cost basis of the underlying (-50¢ on the sale & +$3.00 on the buy back). In any event, I don't see what you did would be a problem..... if you used the same strike. same month call..... I'm not so sure you could apply the Wash Sale loss to a different one....... BWDIK? Ö¿Ö