Tax harvesting of worthless options

[spindr0]

If the contracts are different expirations, it's not a wash sale. It is a gray area, but if you can get away with selling one index ETF and buying the same index ETF from another provider...then wash sales really only apply to the exact same instrument.

Different ETF provider? An Ishares S&P 500 ETF is substantially equivalent to the SPY. It has to be a different index in order not to be substantially identical. But this tangent has nothing to do with options.

Per the IRS, it's a wash sale violation if you sell a security and you acquires an option to buy substantially identical stock. If buying a call is considered substantially identical to long stock then buying a different call should be substantially identical to another call.

 

[ironchef]

Different ETF provider? An Ishares S&P 500 ETF is substantially equivalent to the SPY. It has to be a different index in order not to be substantially identical. But this tangent has nothing to do with options.

Per the IRS, it's a wash sale violation if you sell a security and you acquires an option to buy substantially identical stock. If buying a call is considered substantially identical to long stock then buying a different call should be substantially identical to another call.

If you then sell the one you acquired in the same year, it is a wash in the same year so you recapture the loss in the same year.

 

[spindr0]

If you then sell the one you acquired in the same year, it is a wash in the same year so you recapture the loss in the same year.

Wash sale violations are meaningless if involved positions are closed out by EOY. It's the carryover wash sale violation that you have to be concerned with.

 

[ironchef]

Wash sale violations are meaningless if involved positions are closed out by EOY. It's the carryover wash sale violation that you have to be concerned with.

That was what I said.

 

[Option_Attack]

Yeah this makes me crazy. Sometimes it seems logical and other times...only beer helps.

This is giving me a headache because in situations like this with IBKR, the bid and ask of the combo are negative and in the past, I have placed a bad trade because I don't think negative, well at least not with options. So I reverse the legs to make the B/A positive but that means that I have to sell the combo to buy it LOL. You gotta be on IBKR to understand this.

 

[ETJ]

Ask your broker if they can find a MM to do a Cabinet Trade. Clean exit date and price.

 

[ironchef]

Ask your broker if they can find a MM to do a Cabinet Trade. Clean exit date and price.

I actually did. They said they weren't able to.

 

[ETJ]

You can't always find an MM to do it and most retail won't work very hard as there is no $$ in it.

 

[spindr0]

I had no success closing my various long, worthless 2020 options yesterday, probably because I was trying to buy low priced inactive options as part of the calendar.

Today I used ATM options and got immediate fills, selling my worthless options for one and two cents and then closing the newly bought ATM options. The net result was haircuts of 2-3 cents on various positions which was quite tolerable given the expected B/A spread loss.

Thanks to all who offered suggestions and led me to this solution.

 

[newwurldmn]

I had no success closing my various long, worthless 2020 options yesterday, probably because I was trying to buy low priced inactive options as part of the calendar.

Today I used ATM options and got immediate fills, selling my worthless options for one and two cents and then closing the newly bought ATM options. The net result was haircuts of 2-3 cents on various positions which was quite tolerable given the expected B/A spread loss.

Thanks to all who offered suggestions and led me to this solution.

Close the atm before end of the year. “Like kind” for wash sales is a bit vague.