So I have a few questions about how options are taxed. Since i was had a shit ton of disallowed losses a couple years ago, I want to try and avoid those going forward. So tell me where I am wrong!!! Might be everywhere!
1) If I buy and equity using a covered call. And the call expires OTM, there is not a taxable transaction because I have not sold the stock? Correct?
2) So if I am correct on #1, then you could conceivably sell calls repeatedly on the same shares, if the ALL fell OTM, and the basis value of the stock would just fall. Correct?
So I think I am correct on above. But am not certain, and since I have not given this much thought I thought easier to come ask here.
What I am trying to figure out is how are the costs of rolling, or closing options positions treated? From the perspective of disallowed losses??? For example: Lets say I have a $50 stock that I buy, and sell a covered call a month ahead to sell the Stock for $55. So my cost basis if $45 The stock moves upwards past the $55 mark by a few cents going into the expiration. What is the best strategy from a tax perspective? Do you toll the stock out endlessly potentially to avoid a gain? This is the part I do not get, since I have no personal tax history to draw on.
How is the cost side of the roll taxed? I see a loss for the cost on my books, but how is it treated? Anyhow thinking about it last night after a couple Ritas was not giving me any clarification (not surprisingly) ANY LINK ANYWHERE THAT SIMPLY EXPLAINS THIS?
PSA - If you are in Austin, you can at least get free crawfish today! C-Boys at 5pm. If you RSVP you get a lonestar too I think. And while the markets are sucking, perhaps sucking the heads a few free mudbugs and some Zydeco music might ease the pains of the day.