Cost of Protective Puts

Jay Hattler said:
if I buy the 75's at the Mid ($13.50), then I have the protection for 47 cents
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That is a big IF. I bet they don't fill you at mid market. It is a wide market in a relaticly thinly traded option. The market is 2.00 wide!! I bet they ding you for another .25-.75 than you are planning. Are you willing to pay that?
 
newwurldmn said:
A constructive sale is when you economically remove the risk from a trade. Buying an SP500 index fund and shorting SPY would be the same. Being long SPY and buying 300 strike puts would also qualify. This is really only a risk if you are audited, but it would be better to talk to an accountant as the rules are fuzzy.

I would think the putspread would create an economic risk which would make it not a constructive sale.
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I'm not sure getting around IRS is his goal. If it is a lock up period, I'm not sure what you are concerned about would apply. I have had a reputable IB tell me I could short some stock that was locked up in a separate account as long as I had the margin to cover. All I'm saying is there might be other reasons to do this other than tax.
 
minmike said:
I'm not sure getting around IRS is his goal. If it is a lock up period, I'm not sure what you are concerned about would apply. I have had a reputable IB tell me I could short some stock that was locked up in a separate account as long as I had the margin to cover. All I'm saying is there might be other reasons to do this other than tax.
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There might be other reasons. But he should be aware of the potential issues. I had assumed it was tax related.
 
Thanks to both of you for these answers. I have a good picture now of my options (no pun!). I did not expect to receive such thorough, thoughtful answers, so thank you for your time and expertise.

Jay
 
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