Advice on creating simultaneous gain and loss

The thing is I have a 1.46mil in margin loan (2.651 in total securities) that I want to close out. So buying puts doesn't help me if anything it increases my margin loan.

If I close out everything today I would have my 265k short term gain.

The idea was the Jan 2020 box spread but splitting the bear and bull spreads between two high correlation indexes. One I would close out Dec 2019 to wipe out the 265k gain and then hold onto the profitable one.

Essentially with the goal of transferring my 265k gain of my current 2.651mil portfolio to the profitable component of the box spread that I would then close out in early 2020.

Hypothetically let's say the box would tie up 520k of my current 1.205 NAV, so it would then free up around 700k.

On my end I see the risks as very high correlation between indexes doesn't imply perfect correlation and early exercise, but I would think this risk would be somewhat limited and could go in either direction to my benefit/downside. The goal is a simultaneous loss and gain

If all goes perfectly and there is no early and I make a little 5% premium on the box obviously that would be a plus.
 
gescob3 said:
The thing is I have a 1.46mil in margin loan (2.651 in total securities) that I want to close out. So buying puts doesn't help me if anything it increases my margin loan.

If I close out everything today I would have my 265k short term gain.

The idea was the Jan 2020 box spread but splitting the bear and bull spreads between two high correlation indexes. One I would close out Dec 2019 to wipe out the 265k gain and then hold onto the profitable one.

Essentially with the goal of transferring my 265k gain of my current 2.651mil portfolio to the profitable component of the box spread that I would then close out in early 2020.

Hypothetically let's say the box would tie up 520k of my current 1.205 NAV, so it would then free up around 700k.

On my end I see the risks as very high correlation between indexes doesn't imply perfect correlation and early exercise, but I would think this risk would be somewhat limited and could go in either direction to my benefit/downside. The goal is a simultaneous loss and gain

If all goes perfectly and there is no early and I make a little 5% premium on the box obviously that would be a plus.
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What would you do a Jan 2020 box spread in? It can't be a 1256 contract as they are MTM. I did tax roll all the time in my earlier days for clients when I was on the AMEX.
 
Well you definitely hit on something I hadn't taken into account. I'm assuming the index/options would be 1256 contracts.

Would you have any insight into two highly correlated positions I could take that would not fall into the 1256 category.

I've seen a lot of companies in the same industry move together, but I don't think I would find the 95%+ I would find with an index.

Or another way to achieve my goal.
 
gescob3 said:
I would close out all my current positions now and book the 265k in short term profit.

Essentially what I am looking at are utilizing leap options and building a box spread with expirations in 2020 where both runs are split amongst 2 different indexes, but with high correlations. I would put the bull run on one and the put bear on another...
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Don't get greedy. If you can close out for +$256K profit, worry about the tax problems later. BOOK THE PROFITS.

The longer you hem-and-haw about avoiding tax, the more exposure you allow yourself to a black swan where you suddenly find yourself in the opposite position you are in. If you have to think about it as much as you seem to be, it is not natural to your style, so you should capture the gains NOW before they go away.

Yes?
 
Overnight said:
Don't get greedy. If you can close out for +$256K profit, worry about the tax problems later. BOOK THE PROFITS.

The longer you hem-and-haw about avoiding tax, the more exposure you allow yourself to a black swan where you suddenly find yourself in the opposite position you are in. If you have to think about it as much as you seem to be, it is not natural to your style, so you should capture the gains NOW before they go away.

Yes?
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A 5% Box is a sweet thing, but not having one in front of me, and *especially* not knowing about the opportunity cost of locking up that much margin..... I'm tempted to lean on BOOK THE PROFITS as a fine starting point. If you weren't going to play through Jan 2020, then BOX it up. But to lock up trades with that money (or a risk-prescribed portion thereto??) -- booking the profits and continuing to trade with it.... that might be a fine course, too. Ugh.
 
tommcginnis said:
... and *especially* not knowing about the opportunity cost of locking up that much margin...
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And that is just it, Tom. It is the not knowing bit that would be my Achilles heel. So if I am not sure on the progress of the trade, if I am questioning myself, it seems a better course to take the profits and start over with a new set of trades, rather than risk it with the hope that things will eventually get better if the original trade goes bad suddenly.

I'm dealing with that nightmare in my head right now. It is an awful place to be, surely.
 
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