ha. Laziest writing in a bond movie ever.
It was a real tax strategy if you had an operating business though many hedgefund GP’s (like ackman) are doing it. IRS started cracking down on it.
Liquid options with low spread
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ha. Laziest writing in a bond movie ever.
It was a real tax strategy if you had an operating business though many hedgefund GP’s (like ackman) are doing it. IRS started cracking down on it.
There will be profit and loss in each leg, with the only exception being if the underlying does not change at all during a 2 to 8 week period which is extremly unlikely. I think we can agree on that.
Pls read my posts carefully. The IRS is not a part of it as the client has not and will not live in US. Its a tax arb strategy. Profit sometimes arises while living in a country that does not tax cap gains at all like Panama and the losses happen in the year when you live in a country that taxes capital gains but also recognises losses.
I like your post and the warning about the high premiums! I have not yet looked at premiums as I am still looking for the right underlying in my case.
Does it make sense to try the paper account with IB or are the "filled" options pricing way off the real prices? Will try anyway but want to make sure if my dry run is realistic.
Regarding your comments on tax, again US Cap Gains Tax rules do not apply.
Example: You open sn overall market neutral position in buying and selling futures for 10 Millions USD notional on each side. 1 december 2022 (Client living in Panama for example)
Markets changes 5% within 2 weeks (again example). You close the winning side and realize 500.000 USD "profit" in 2021. Immediatly you reopen the futures (risk here of an gap I am aware). Now you wait with market neutral position until 5th of January and close ALL positions and book 500.000 USD loss.
It is more or less this is want I need to do with options. I am willing to risk 2% of invested sum but I am not willing to accept a "guaranteed" loss of more then 0,5% of notional if premiums are too high.
This strategy would work perfectly if the tax jurisdiction would accept futures in this way alas it does not, it only accepts options in this way. All this is perfectly legal!
I have more then 20 years experience on the tax side in numerous jurisdictions outside the US.
The exception to this being if I miss out that non us citizens are being taxed on dividends with withholding tax or have to pay cap gains like in the case of limited partnerships as from 2023 onward. To my understanding dividend payments and their tax treatment should be neutral as I hold both sides. Am I right?
Thanks!
Tax loss harvesting can amount to 100% of the notional in some cases. Again not working for anyone based in the US.
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Specific reason being potential 20-30% tax saving on notional. Would you trade with this info or would you say risk is too high. As I would be selling the options a high premium would help me. I shall not have my options exercised early for tax reasons. This happened to me on stock options before, that is why I am looking for index options as some of them are european options.
I am not clear on your actual goal and in order to understand you should provide more precise info on what you are doing and why, or else it's difficult to say anything.
Usually, I work with investors, who, in practice, find ways to not pay any taxes at all, and therefore my concern is to make as much $$$ as possible, and not mix the trading approach with the tax concerns. Also because losses and DD are usually negligible (<5%).
Anyway, talking of pure theory, about the trade you are contemplating, since you mentioned about 2 weeks duration, take for instance the available strikes for short-term options. If you have problems with data you may take for instance momentarily the quotes from Barchart or other similar website:
I am receiving the same quotes directly on my platform, so I can take them from there:
Now, you can clearly see that if you sell (ITM)
PUT 4080
CALL 3990
you get this payoff:
if instead, you sell (OTM)
CALL 4080
PUT 3990
you get this payoff:
So, as has been already pointed out by two posters (getthatintoya, TheDawn), in any case, you get a "risk equivalent" strangle (but slightly more convenient OTM).
But the spread values are as follows:
ITM
ES FOP 20221209 3990 C CME 50 E-mini S&P 500 [EW2Z2 C3990, 592160444, mult: 50]
ES FOP 20221209 4080 P CME 50 E-mini S&P 500 [EW2Z2 P4080, 592312679, mult: 50]
Spread values: $25
OTM
ES FOP 20221209 4080 C CME 50 E-mini S&P 500 [EW2Z2 C4080, 592312694, mult: 50]
ES FOP 20221209 3990 P CME 50 E-mini S&P 500 [EW2Z2 P3990, 592160462, mult: 50]
Spread values: $12.50
(Not sure why would one consider this basic configuration as low risk and why you say that one leg would be "covering the other part". Probably I am missing something.)
Paper trading execution is generally accurate on IB. Sometimes in real money trading, one can get slightly faster or more favourable executions.
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A conversion and roll, dude.
You buy underlying and sell the forward synthetic. Buy XYZ at 100 and short the 110 synthetic in n-tenor 2025. Market rallies and you cover shares and take the gains on shares in Panama in 2023. You immediately buy the synthetic for n-tenor 2025 (effecting the box). Cover another profitable leg in 2024 and either long or short against the existing synthetic.
What you propose is moronic.
Dude, he’s not going to fck you. He’s trading purely for tax avoidance. The two week series does nothing for him. Whoosh.
You’re in the BOX, BRO. You’re long(short) the guts and short(long) the outside strangle. Trading the inside strangle against the equivalent (risk) outside is long at x and short at y (long box) but does nothing for this dude unless you make it a term structure trade. Fucking brilliant but you need to be in the rolls, not the short term box.
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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 just a small fixed gain in both accounts if the price remains within.