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Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: Spots who wrote (572)	11/23/1998 3:16:00 PM
From: Kaye Thomas	Read Replies (1) \| Respond to of 1383

The tax law's definition of a straddle doesn't require that the positions completely offset one another. Subject to certain qualifications, you have a straddle if there's a substantial diminution in risk of loss from holding any position by reason of holding one or more other positions. One of the qualifications is that you don't have a straddle if your holdings consist of stock and qualified covered calls. There's no similar rule for puts, however. A put reduces your risk of loss for the underlying stock and therefore creates a straddle. Strictly speaking, selling short against the box doesn't create a straddle, but short sales are subject to rules that have consequences similar to the straddle rules, including resetting the capital gains holding period. Kaye