I buy a LEAPS call or put and sell it a year later. i get a long-term gain or loss right? But what if I occasionally hedge it with short short-term calls or puts? Does my long LEAPS contract lose its long-term gain/loss status?
LEAPS and taxes
- Thread starter SoCalOptionsWriter
- Start date
Technically, I think you are supposed to take into consideration all the derivatives on an underlying when doing taxes, but not sure how you'd even do it here and no way the IRS will sit there and say, hey, he has qqq with 2 year maturity and he's hedging with short term qqq options, that leap should be short term when he sold it. I just don't see that happening. Tax stuff can get real complicated with derivatives so I just do the best I can. I think holding qqq and buying puts people would be in a similar situation. Id count it as a long term myself, but not sure how much money you have in it. If it's very significant I'd get a tax advisers opinion.
"According to the tax code, short- and long-term losses must be used first to offset gains of the same type. But if your losses of one type exceed your gains of the same type, then you can apply the excess to the other type." - fidelity
your leaps will be LTCG, your hedges will be short term capital gains OR losses and will offset each other with any remaining losses being applied to the gains on your LEAPs. pretty nice system really.
your leaps will be LTCG, your hedges will be short term capital gains OR losses and will offset each other with any remaining losses being applied to the gains on your LEAPs. pretty nice system really.
I’m just looking at tax tables and my longterm rate is zero as long as my income stays under 96000 or 15 percent if under 400000. Nice side benefit of holding a LEAPS option.
Not a buyer of options here...
but I think all options are short term holds, for tax purposes.
Makes sense too.
The long term holding tax advantage (in rates)
is to encourage less trading.
CFOs of listed companies prefer that.
Makes their jobs easier to plan, and better, higher returns
returns more doable.
but I think all options are short term holds, for tax purposes.
Makes sense too.
The long term holding tax advantage (in rates)
is to encourage less trading.
CFOs of listed companies prefer that.
Makes their jobs easier to plan, and better, higher returns
returns more doable.