The tax rules applied when you write in-the-money covered calls are exceptionally complicated.

Help with tax implications for rolling a call option : wallstreetbets

There are several rules to keep in mind to determine whether your in-the-money covered call is qualified or unqualified. With a qualified covered call, your stock does not risk losing its long-term capital gains status; if the covered call is unqualified, then treatment of stock profits changes as a consequence.

You had large losses in your portfolio in the years and However, by selling in-the-money covered calls you create numerous short-term profits, both in calls and in stock exercised against your in-the-money short calls. You view this as one way to shelter short-term profits.

Current-year gains are applied against the large carryover loss, so you have no net tax consequences this year. Market Commentary Market Data Getting Started Stocks Stock of the Day Market Movers Industries Sectors References ETFs Movers Families References Mutual Funds Movers Families References Investing Bonds Commodities Forex Currency Options Real Estate Economy Personal Finance Banking Budgeting Credit and Debt Financial Planning Insurance Taxes Retirement Educational Planning Personal Finance Guide Business Career Dispute Resolution Management Law Contracts English Glossary Spanish Glossary.

You wrote two covered calls last week. Example A Math Challenge: You own shares of stock in several corporations.

How to Roll Options Positions

You want to write covered calls in the money, but you want to ensure that all are qualified. To qualify a covered call, it must be one striking price below that level, or 70, if the call is set to expire within 31 to 90 days. If the call is set to expire beyond the day limit, you can write a call two striking prices below the prior day's close, which is the 65 call.

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If you write any in-the-money calls other than these, they will be unqualified. Example Coming Up Short: You have owned shares of stock for 11 months. You write an unqualified covered call, and your long-term holding period is suspended.

Three months later, the call is exercised and you give up your stock at a profit. Even though you owned the stock for 14 months, your gain is treated as short term.

You sold an unqualified covered call, so the period required before long-term rates apply is suspended. Example The Absorption Factor: Michael Thomsett is a British-born American author who has written over 75 books covering investing, business and real estate topics.

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Turn Your Business Into a More Investable Commodity. What is a QTIP Trust and How Can it Help You. One striking price below prior day's closing stock price Exception: Two striking prices below prior day's closing stock price but not more than 10 points in the money.