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Strategies & Market Trends : Systems, Strategies and Resources for Trading Futures -- Ignore unavailable to you. Want to Upgrade?

To: Tom Trader who wrote (3906)	9/11/1998 6:57:00 AM
From: Patrick Slevin	Respond to of 44573

Technically, when you short a stock it is in another account. Within your account there ia a Cash account, a Margin account, a Short account and so forth. Aside from knowing that, I defer to Scott. I thought they futzed with the rules on shorting against the box a few years back and I no longer know the rule.

To: Tom Trader who wrote (3906)	9/11/1998 7:56:00 AM
From: MonsieurGonzo	Read Replies (1) \| Respond to of 44573

TT; RE:" short hedge " ...actually it's called, "shorting against the box". I think Judy may know all about this Tom. right - we're at the bottom of the second wave here; the third test of perceived supports for this trading level - we either bounce or plunge to a new level. The last "level' we were at had four waves, and we plunged on the fifth test of 1060. seems perfect for a Long Straddle to me, BWDIK - I'm just a rookie :-) have fun today -Steve

To: Tom Trader who wrote (3906)	9/11/1998 8:08:00 AM
From: j g cordes	Read Replies (1) \| Respond to of 44573

Tom, here's your answer: invest-faq.com this is also good, you may wish to bookmark it: efmoody.com Jim

To: Tom Trader who wrote (3906)	9/11/1998 8:34:00 AM
From: SE	Read Replies (1) \| Respond to of 44573

Tom, Shorting against the box as a hedge appears to be no longer applicable. However there is an exception (safe harbor) to the rule that appears it might do what you need. If there is a constructive sale of a position (shorting against the box) gain or loss will be recognized as if such position is sold outright. The new Code section even covers this in case a "related person" takes a hedging position as a way to try to avoid the rule. Now, however, there is a safe harbor for short-term hedges that may be applicable in your case. This is the first I am reading this so don't know the complete applicablity now and cannot find out this morning so I will just type it out for you. The constructive sale rules will be disregarded if: 1)the transaction is closed before the end of the 30th day after the end of the tax year in which the trascation was entered into; 2)the taxpayer holds the appreciated financial position throughtout the 60 day period beginning on the date the transaction is closed; 3)at no time during such 60 day period is the taxpayer's risk of loss with respect to the position reduced by cirucumstance that would be described in Code Sec 246(c)(4) if references to stock included references to such position: Code Sec 246(c)(4) 1) the taxpayer has an option to sell, is under a contractual obligation to sell, or has made (but not closed) a short sale of substantially identical stock or securities 2)the taxpayer is the grantor of an option to buy substantially identical stock or securities 3)under regs prescribed by the Treasury Dept the taxpayer has diminished his or her risk of loss by holding one or more other positions with respect to substantially similar or related property. (of course these Regs won't be out for years, so who knows all what will be in them!) The above appears to me to indicate that short against the box still has applicability with respect to market exposure...you only have to be exposed to risk of loss for 60 days of the tax year it appears. Another method they discuss is collars. Say INTC is at $85. (It is somewhere around that). You could sell a call strike $100 and buy a put strike $80. This still exposes you to substantial risk in the eyes of the IRS and is not treated as a constructive sale. (however, which strikes and how much risk you must be subjected to is not yet known, but in this example you are at risk for moves over $100 and at risk on the downside for $5). For example, If you sold a call priced $150 and had a put priced $85, your risk is so limited that you would not be under substantial risk of loss, my interpretation. It appears the IRS wants you to be at risk on the position for at least 60 days of the year, or at risk to lose something with respect to the collar. Anything that eliminates the risk completely is now a constructive sale of the position. Hope this helps. -Scott