Burned on TSLA Put, please help me understand wash sale rule

S

sepidpooy

I am selling put on TSLA and has just hit a big 10k loss. It wiped out a few months of profit. But I am still net $6k positive on this TSLA put selling strategy for 2020.

If i keep selling then I have to pay tax on $6k YTD profit only. Is that right?

But if I don’t sell puts for 31 days then I can claim 10k loss which means not only I don’t need to pay tax on my 6k TSLA profit but also I can deduct 4k from my other profits this year.

Did I get it right?

What if I sell different strikes and expiration? Put selling is very addictive I can’t stay away :)
 
Making trading decisions based on tax treatment is a very inferior approach to trading. If you feel so impacted by whether you need to pay taxes on a 6k profit then you should not be trading so leveraged and especially not trade options. The loss you don't realize this tear you either reduce or realize next year. But trading based on tax optimizations potentially costs you a lot more by realizing pnl at inferior points in time.

sepidpooy said:
I am selling put on TSLA and has just hit a big 10k loss. It wiped out a few months of profit. But I am still net $6k positive on this TSLA put selling strategy for 2020.

If i keep selling then I have to pay tax on $6k YTD profit only. Is that right?

But if I don’t sell puts for 31 days then I can claim 10k loss which means not only I don’t need to pay tax on my 6k TSLA profit but also I can deduct 4k from my other profits this year.

Did I get it right?

What if I sell different strikes and expiration? Put selling is very addictive I can’t stay away :)
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sepidpooy said:
I am selling put on TSLA and has just hit a big 10k loss. It wiped out a few months of profit. But I am still net $6k positive on this TSLA put selling strategy for 2020.

If i keep selling then I have to pay tax on $6k YTD profit only. Is that right?

But if I don’t sell puts for 31 days then I can claim 10k loss which means not only I don’t need to pay tax on my 6k TSLA profit but also I can deduct 4k from my other profits this year.

Did I get it right?

What if I sell different strikes and expiration? Put selling is very addictive I can’t stay away :)
More...
You trade way too big for TSLA options for your level of understanding options. I cannot help you with tax but strikes are the level when the option is at the money (pass that it is either in or out of the money based on the current price and expiration is the day the option will expire.
TSLA exercise/assignment is about 66600 USD just for one option if you ever get there.
Yesterday I traded a way out of the put spread and because I was WRONG and the spread of bid and ask in TSLA, I lost a little (about $240). Hard to get out of TSLA spreads, and when the market maker knows you are stuck he will suck your blood out. Better trade tighter spreads but I congratulate you for selling calls, you called the market.
P.S. I trade options in my IRA so taxes are never a problem, profits are :)
 
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You trade to make money. If you make money you have to pay taxes.

Focus on making money. Don't let the tax tail wag the dog.

TSLA is at record highs. How could you be losing money on a TSLA put you sold?
 
jeb9999 said:
You trade to make money. If you make money you have to pay taxes.

Focus on making money. Don't let the tax tail wag the dog.

TSLA is at record highs. How could you be losing money on a TSLA put you sold?
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Because TSLA is at record highs, he lost money on the put he sold. Short a put option. Put sold = you pay the difference between the strike and the close if it is above the strike price of the put you have sold.
 
jeb9999 said:
TSLA is at record highs. How could you be losing money on a TSLA put you sold?
More...
I sold put vertical credit spreads on weeklies and realized huge loss on 12/09. I freaked out that by the expiration it would hit my max loss and I closed it two days early.
 
danielc1 said:
Because TSLA is at record highs, he lost money on the put he sold. Short a put option. Put sold = you pay the difference between the strike and the close if it is above the strike price of the put you have sold.
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You have it all wrong.

If stock goes up then put price goes down. Short a put makes you money.

At expiration if the stock price is above the put strike price the put is worthless.

Put sold = you pay the difference between the strike and the close if it is BELOW the strike price of the put you have sold.
 
sepidpooy said:
I sold put vertical credit spreads on weeklies and realized huge loss on 12/09. I freaked out that by the expiration it would hit my max loss and I closed it two days early.
More...

You are taking on too much risk. TSLA is a volatile stock and has high risk for option sellers.

If you had manageable risk you would not freak out when a position goes against you.
 
jeb9999 said:
You are taking on too much risk. TSLA is a volatile stock and has high risk for option sellers.

If you had manageable risk you would not freak out when a position goes against you.
More...

I hear you. Live to learn. Not gonna happen again.

Can some one just answer my original question instead of criticizing me in here.
 
Check with a tax professional to be sure. But you net all option trades in that security for the year. If this is positive, no worries. If negative, you can't trade the security in January next year. That could create a wash sale. The IRS rules for options are not clear, but to be safe just don't try to book a loss and then rebuy within the WS period next year.

Wash sales, while confusing, are simply to stop you from taking a loss on taxes, then quickly buying back the security for next tax year.
 
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