it’s an arb. WTF are you showing independent payoff diagrams?
I told the OP on page 2. I knew it was a tax strategy and there are only two people on this thread that know what they are talking about.
Liquid options with low spread
- Thread starter statist
- Start date
it’s an arb. WTF are you showing independent payoff diagrams?
I told the OP on page 2. I knew it was a tax strategy and there are only two people on this thread that know what they are talking about.
Hmm, thank you. But I am still probably not getting what is the advantage of the proposal.
How do you guarantee that you gain in the specific account subject to no-tax jurisdiction and not the other way around?
Unless you can just somehow "swap paperwork" at will, I do not think that is going to happen
If you could guarantee that, you could do it on any account,
and obviously would make $$$ with that and not trying these tricks to reduce taxes.
Further, the losses accumulated in the "taxed" jurisdiction are actually useful only
if there is eventually something to tax.
In addition, the position planned to open is not "market neutral" in the sense
that what loses one leg is gained by the other.
A strangle may cause a loss (limited only by time and underlying move) in one account and a small fixed gain in the other one, if the prices escape the strike range, or a small fixed gain in both accounts if the price remains within.
Because you pull the profitable leg in the tax haven year and replicate. Or you pull the losing leg in the taxable domicile and replicate. You’re not getting this. Someone I know did this for someone I know on $30MM notional. They both died in a boating accident in 1909.
Hmm, trying to understand. Assume we have 2 accounts, say one is in Panama, and one in Switzerland.
Say I make money in the second account. How do I "pull the profitable leg in the tax heaven" and vice versa?
You don’t need two accounts, but you can.
Buy MSFT -> short synthetic in n-2025 at 260 strike. You are now in the conversion. You are simultaneously long spot and short synthetic spot. No risk outside assignment but it doesn’t matter for illustration. Some rho as well but you’re not covering. Use index.
Enter 2023. You’re hiding in Panama due to the Paradise Papers and MSFT is up big. You take the gain on shares -> buy the synthetic at n-tenor 2025. You are now in a roll (long synthetic at x, short synthetic at y, 2025).
Enter 2024. You’re back in Germany plotting the Fourth Reich and need a tax loss for the next putsch. You cover the losing 2025 synthetic leg of the roll-arb -> either go long or short underlying against the remaining synthetic. You can keep this shit up forever or until you’re deposed/exiled.
It seems complex but it’s not. You’re just a bit out of your depth.
I get that he is possibly doing this not as a trading strategy, but to save on taxes.
However, the two charts only show that whatever he is planning to do with ITM options he can do just the same, and better, with OTM options. Since he was so concerned about the spread.
It is immaterial how he uses the configuration and if the legs are on different accounts (arbitrage or whatever).
omg. stop.
Ok, I begin to get the picture. So we are talking of continuously moving across countries in time like a fugitive just to save on taxes
Well, sure I am not familiar with that and it is, and will remain, certainly "out of my depth"
Ok, I begin to get the picture. So we are talking of continuously moving across countries in time like a fugitive just to save on taxes
Well, sure I am not familiar with that and it is, and will remain, certainly "out of my depth"
Dude, he stated it. Who cares why? He was explicit about taking a loss in a tax domicile and gains in the tax haven.
love it
@destriero... you shoulda been a comedian!