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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (976)4/13/2004 7:28:35 PM
From: Howard R. Hansen  Read Replies (1) | Respond to of 1064
 
Dan, thanks for your reply. I have since found out that the first quote in my post applies to holders of options, a person who opens a position by buying a put or call. Whereas the second quote applies to writers of options, a person who opens a position by selling a put or call. Anyone know why the IRS uses different rules for determining short or long term gains for holders and writers of options?

PS The IRS has a nice table on page 57 in publication 550 that summarize the tax rules for options.



To: Dan Duchardt who wrote (976)4/16/2004 12:05:40 PM
From: Steve168  Read Replies (1) | Respond to of 1064
 
Sell put to buy the stock.

If I like MSFT, and patient enough to buy at a lower price, I can sell the July 25 put for $1, and if MSFT go down enough, the put will get exercised and I got MSFT at 24 (25-1).

Has anyone done this before?

What if the put get down to 10cents on July expiration day, and I did not buy it back? Do I just pocket all the $1 premium? Do I have to buy the put back?

Thanks,


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