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

Also note, even with a disallowed wash sale you just add to the basis for the trades and take the loss next TY. So really, no big deal anyway. You don't lose the tax loss forever.
 
jeb9999 said:
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.
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Indeed, I described the naked call. Good that there are others on the forum to correct it.
 
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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You'll pay taxes on your closed trades for the year.
 
Option_Attack said:
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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Just to reinforce this, if you don't buy or sell ANY TSLA options for the first 30 days of Jan you won't be subject to any wash sale rules. You could also refrain from trading for all of December, but it might already be too late for that. Generally a different option strike is not enough to avoid the wash sale rule.
 
Sig said:
Just to reinforce this, if you don't buy or sell ANY TSLA options for the first 30 days of Jan you won't be subject to any wash sale rules. You could also refrain from trading for all of December, but it might already be too late for that. Generally a different option strike is not enough to avoid the wash sale rule.
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I am net $6k positive on tesla options this year. What happen if I do trade it in Jan? Do I need to pay tax on more than $6k that I earned?

My last option trade closed on 12/9 with 10k loss.
 
sepidpooy said:
I am net $6k positive on tesla options this year. What happen if I do trade it in Jan? Do I need to pay tax on more than $6k that I earned?

My last option trade closed on 12/9 with 10k loss.
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We'd need to know all your trade dates and losses/gains but very possibly you would have to pay tax on more. The wash sale rule effectively treats wash sales like the sale event didn't happen and you still have the original position for losses but not gains. So if you never had a 30 day break this year you would pay tax on all your gains without being able to deduct any losses. Note that those losses aren't home forever for tax purposes. If you stopped owning the security for 30 days at any point in the future then you could claim the losses in that tax year. So you're really just deferring your ability to take the loss. Might actually be a good strategy if you think tax rates will go up in a future year I suppose.
 
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