why not just sell 2 naked puts.

[taowave]

I havent looked at tax trades in a long time,but there may be some sort of tax code which defines the minimum % strike level one must sell that does not negate the long term holding tax advantage

Quote from vhehn:

i emailed him about it. just got his explanation. the tax treatment is better:

"The tax treatment is quite different. On the actual share purchase you can get long-term gains while collecting dividends at the reduced tax rates they command.

If you short two puts instead and they expire worthless your gains are 100% short-term regardless of how long you had the position in place since you never had a 'holding period'. "

 

[spindr0]

Quote from taowave:

I havent looked at tax trades in a long time,but there may be some sort of tax code which defines the minimum % strike level one must sell that does not negate the long term holding tax advantage

I'm not up either. Last I knew, deep ITM writes are labeled unqualified and can stop the stock’s holding period or create a straddle resulting in negative tax consequences.

Deep ITM is anything below the highest strike below the underlying's price unless the option is for more than 90 days and the stock is over $50 then it's anything below the second highest strike.

The tax code is a freakin nightmare.

 

[my7tvette]

Quote from taowave:

You want to make 3 bucks + dividends minus carry over 2 years and take downside risk?

Personally, no...but I don't want to do the original trade either. I just threw it out there for comparison.

 

[wouter]

Why sell ANY naked puts? Why take an unlimited risk for a defined return? I know it can be done and there are good methods to do this but you REALLY need to know what you are doing.

 

[KINGOFSHORTS]

Quote from wouter:

Why sell ANY naked puts? Why take an unlimited risk for a defined return? I know it can be done and there are good methods to do this but you REALLY need to know what you are doing.

Why? Because I want to go long a stock but it is not trading at the price I am willing to go long the equity?

So instead I collect a premium while wait for my stock, and if I do not get the stock then I can chose to write another contract?

naked put is not unlimited risk, naked call is unlimited risk.

 

[Traveler]

Buy-writes, while identical to short puts, are perceived to be less risky than short puts in the media. They imply a kind of "I was going to own the stock anyway" kind of logic.