Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: Debt Free who wrote (2220)	12/30/2020 11:27:56 AM
From: wilywilly	1 Recommendation Recommended By TheNoBoB Read Replies (1) \| Respond to of 2591

In addition, this is in a regular maybe taxable account and if I hold the option should be considered a long term gain instead of short term. Selling options short generates short term capital gains (STCG), no matter how long you hold the position. If a short covered call option is exercised, meaning you sell the underlying stock, the option premium is added to the sales proceeds, so can become a LTCG if the stock was held more than a year. From Fidelity research: Tax treatment of covered calls According to Taxes and Investing, the money received from selling a covered call is not included in income at the time the call is sold. Income or loss is recognized when the call is closed either by expiring worthless, by being closed with a closing purchase transaction, or by being assigned. If a call expires worthless, the net cash received at the time of sale is considered a short-term capital gain regardless of the length of time that the short call position was open. If a covered call is closed with a closing purchase transaction, the net capital gain or loss is considered short term regardless of the length of time that the short call position was open. If a covered call is assigned, the strike price plus the premium received becomes the sale price of the stock in determining gain or loss. The resulting gain or loss depends upon the holding period and the basis of the underlying stock. If the stock delivered has a holding period greater than one year, the gain or loss would be long term.

To: Debt Free who wrote (2220)	12/30/2020 1:21:10 PM
From: THornsby	Respond to of 2591

> In addition, this is in a regular maybe taxable account and if I hold the option should be considered a long term gain instead of short term. That's true if you hold the stock long-term and the LEAP is exercised. If you buy to close the call or it expires, the amount you received is a short-term capital gain. Details available in IRS Publication 550.

To: Debt Free who wrote (2220)	12/30/2020 3:12:06 PM
From: robert b furman	Read Replies (1) \| Respond to of 2591

Hi Debt Free, Every one bashes T, then their earnings come out and they beat. T is a serial sandbagger and during the webcast, they project caution but state they're confident the numbers will be better than guided. Post earnings seems to be when the stock gets a bid. Then all the negative barrage comes out. I've been selling puts on declines into 27ish, and going out far in time. You get the cash up front, and price finds support when yield is 7% plus. I'm guessing the dividend mutual funds like to buy there and do some of the bashing to get it there. My last puts sold were for March 26's. Sold them on 9/23 for $1.38 so went 6 months out and if assigned net purchase price = $24.62. $2.08/$24.62 = yield of 8.44%. Mutual funds will move in to support the price before that is reached. So in lieu of CD or MMF's $1.37/ $24.62 (premium / net purchase price)= 5.56458%/.5 (6 months)= 11.129 % annualized. This gets you then cash up front, and time decay(of shorting a put sold) is on your side. In time decay I trust! every year Going further out in time maximizes premium so if assigned , your yield is higher. Time decay is less the further out, but it is conservative. If I want to buy the stock I'll go out 30-60 days and sell a closer strike price. If I can get 5-7 percent in this market, that's winning. Patient and methodical return on your cash has so far been a solid plan for me - but it has also been a bull market , excepting energy. It's a simple plan, often many like to get so complex with options. In a bad market, where fear works against you, I look at the swings of premium (which are scary at times) and then say, would I like to buy the stock and get an annual income of 5-7% every year out in time? It takes the fear out of the market for me. I also like the lower tax rate for dividends. In truth, the annualization is not completely accurate, since one can not duplicate the premium for each day of the year. As you watch more and more dividend aristocrats, there are always other stocks doing the same thing. If you buy a stock and get underwater on it, reapply the dividend stream and buy more shares at a discount. My comfort level of holding a stock is my cost basis, minus one to two years of dividends. Energy was such an one off, I decided to go for it and make it a long term buy and hold. Today I got 1500 shares of XOM assigned to me early ( 10 January puts I sold back in 7/21/2020 for $16.55 (in my comfort zone) and 5 I sold 8/23/19 for 4.55) erg I try to sell the puts in thirds. One third at a strike price I'd like to get the stock. another third when the fear boosts the premium, the last third at a lower strike price, that helps me buy those assigned. I have some January 2022 XOM's at 35 and 37.50. If they cut the dividend by 50%, I'll still be getting my 5 to 6 %,or they'll help me pay for the ones I've just bought a year later. Hope that helps! Bob