(05-04-2021, 02:48 PM)fenders53 Wrote:

(05-04-2021, 02:39 PM)vbin Wrote: Does wash sale rule applies while rolling options?

If you are moving the date or strike  I can't imagine that works.  It's not the same security/investment.  Chad would know.

(05-04-2021, 03:04 PM)vbin Wrote:

(05-04-2021, 02:48 PM)fenders53 Wrote:

(05-04-2021, 02:39 PM)vbin Wrote: Does wash sale rule applies while rolling options?

If you are moving the date or strike  I can't imagine that works.  It's not the same security/investment.  Chad would know.

I find differing opinions online. It's not clear. Some say it doesn't, some say it does. @ChadR any idea?

(05-04-2021, 03:39 PM)ChadR Wrote:

(05-04-2021, 03:04 PM)vbin Wrote:

(05-04-2021, 02:48 PM)fenders53 Wrote:

(05-04-2021, 02:39 PM)vbin Wrote: Does wash sale rule applies while rolling options?

If you are moving the date or strike  I can't imagine that works.  It's not the same security/investment.  Chad would know.

I find differing opinions online. It's not clear. Some say it doesn't, some say it does. @ChadR any idea?

The reason you find differing opinions is because the Treasury Department hasn't issued any regulations on this.  The conservative route is yes they do apply since you are going in the same direction with the old option as the new option.  The aggressive route is no they don't apply since it is a different option with different dates and or prices.

Now it's getting taken out of your hands in some cases.  If the brokerage company you uses says it's a wash sale and reports it to the IRS as one, you're pretty much stuck reporting it that way.  Now you can not report the wash sale, but you might get audited over it.  You would have to fight it all the way to the Supreme Court.  This might get the Treasury Department to finally issue some regulations on this.  But how much are you going to be out in attorney and CPA fees to get them to issue regulations on this?

Now wash sales don't apply to gains at least.

(05-04-2021, 04:01 PM)fenders53 Wrote:

(05-04-2021, 03:39 PM)ChadR Wrote:

(05-04-2021, 03:04 PM)vbin Wrote:

(05-04-2021, 02:48 PM)fenders53 Wrote:

(05-04-2021, 02:39 PM)vbin Wrote: Does wash sale rule applies while rolling options?

If you are moving the date or strike  I can't imagine that works.  It's not the same security/investment.  Chad would know.

I find differing opinions online. It's not clear. Some say it doesn't, some say it does. @ChadR any idea?

The reason you find differing opinions is because the Treasury Department hasn't issued any regulations on this.  The conservative route is yes they do apply since you are going in the same direction with the old option as the new option.  The aggressive route is no they don't apply since it is a different option with different dates and or prices.

Now it's getting taken out of your hands in some cases.  If the brokerage company you uses says it's a wash sale and reports it to the IRS as one, you're pretty much stuck reporting it that way.  Now you can not report the wash sale, but you might get audited over it.  You would have to fight it all the way to the Supreme Court.  This might get the Treasury Department to finally issue some regulations on this.  But how much are you going to be out in attorney and CPA fees to get them to issue regulations on this?

Now wash sales don't apply to gains at least.

Thanks Chad.  Not exactly what I thought you would say, but it makes sense.  We are clearly selling derivatives of the exact same security, so it's not so hard to make the case we are subject to the wash rule. I guess I will keep my option trades in my tax advantaged accounts forever.

Not exactly sure what you mean by directional though.  In an upside down trade I can, and have, rolled my future strike up or down after considering time value when the trade occurred.  In the end buying or selling a put or call is clearly a bullish or bearish trade by definition.

(05-04-2021, 04:19 PM)Otter Wrote:

(05-04-2021, 04:01 PM)fenders53 Wrote:

(05-04-2021, 03:39 PM)ChadR Wrote:

(05-04-2021, 03:04 PM)vbin Wrote:

(05-04-2021, 02:48 PM)fenders53 Wrote: If you are moving the date or strike  I can't imagine that works.  It's not the same security/investment.  Chad would know.

I find differing opinions online. It's not clear. Some say it doesn't, some say it does. @ChadR any idea?

The reason you find differing opinions is because the Treasury Department hasn't issued any regulations on this.  The conservative route is yes they do apply since you are going in the same direction with the old option as the new option.  The aggressive route is no they don't apply since it is a different option with different dates and or prices.

Now it's getting taken out of your hands in some cases.  If the brokerage company you uses says it's a wash sale and reports it to the IRS as one, you're pretty much stuck reporting it that way.  Now you can not report the wash sale, but you might get audited over it.  You would have to fight it all the way to the Supreme Court.  This might get the Treasury Department to finally issue some regulations on this.  But how much are you going to be out in attorney and CPA fees to get them to issue regulations on this?

Now wash sales don't apply to gains at least.

Thanks Chad.  Not exactly what I thought you would say, but it makes sense.  We are clearly selling derivatives of the exact same security, so it's not so hard to make the case we are subject to the wash rule. I guess I will keep my option trades in my tax advantaged accounts forever.

Not exactly sure what you mean by directional though.  In an upside down trade I can, and have, rolled my future strike up or down after considering time value when the trade occurred.  In the end buying or selling a put or call is clearly a bullish or bearish trade by definition.

I would feel very comfortable arguing in tax court that call options for the same ticker with different strikes/expiries are not "substantially identical" for purposes of the Wash Sale Rule. I would also feel very comfortable arguing the same where only the strike price or expiry differs from one option to the other. 

In the absence of regulatory guidance, the court should apply the ordinary and plain meaning of "substantially identical" for purposes of applying the Wash Sale rule to options.

I have felt very comfortable arguing things to courts before. Sometimes I am successful, and sometimes I am not. Chad is correct that being the test case on this issue would be a lengthy and expensive process for most people. The way tax disputes work, you pay the IRS the disputed amount up front, then spend years arguing before tax and appellate courts that you don't owe what has already been paid for whatever reason. The system does not encourage creative advocacy, except for the wealthiest of taxpayers and corporations where huge sums of money turn on the ultimate decision.

(05-04-2021, 04:30 PM)fenders53 Wrote:

(05-04-2021, 04:19 PM)Otter Wrote:

(05-04-2021, 04:01 PM)fenders53 Wrote:

(05-04-2021, 03:39 PM)ChadR Wrote:

(05-04-2021, 03:04 PM)vbin Wrote: I find differing opinions online. It's not clear. Some say it doesn't, some say it does. @ChadR any idea?

The reason you find differing opinions is because the Treasury Department hasn't issued any regulations on this.  The conservative route is yes they do apply since you are going in the same direction with the old option as the new option.  The aggressive route is no they don't apply since it is a different option with different dates and or prices.

Now it's getting taken out of your hands in some cases.  If the brokerage company you uses says it's a wash sale and reports it to the IRS as one, you're pretty much stuck reporting it that way.  Now you can not report the wash sale, but you might get audited over it.  You would have to fight it all the way to the Supreme Court.  This might get the Treasury Department to finally issue some regulations on this.  But how much are you going to be out in attorney and CPA fees to get them to issue regulations on this?

Now wash sales don't apply to gains at least.

Thanks Chad.  Not exactly what I thought you would say, but it makes sense.  We are clearly selling derivatives of the exact same security, so it's not so hard to make the case we are subject to the wash rule. I guess I will keep my option trades in my tax advantaged accounts forever.

Not exactly sure what you mean by directional though.  In an upside down trade I can, and have, rolled my future strike up or down after considering time value when the trade occurred.  In the end buying or selling a put or call is clearly a bullish or bearish trade by definition.

I would feel very comfortable arguing in tax court that call options for the same ticker with different strikes/expiries are not "substantially identical" for purposes of the Wash Sale Rule. I would also feel very comfortable arguing the same where only the strike price or expiry differs from one option to the other. 

In the absence of regulatory guidance, the court should apply the ordinary and plain meaning of "substantially identical" for purposes of applying the Wash Sale rule to options.

I have felt very comfortable arguing things to courts before. Sometimes I am successful, and sometimes I am not. Chad is correct that being the test case on this issue would be a lengthy and expensive process for most people. The way tax disputes work, you pay the IRS the disputed amount up front, then spend years arguing before tax and appellate courts that you don't owe what has already been paid for whatever reason. The system does not encourage creative advocacy, except for the wealthiest of taxpayers and corporations where huge sums of money turn on the ultimate decision.

If we retained you, we would expect you to comfortably argue TSLA LEAP calls are the same as an F put.  They sell cars right?  

(05-04-2021, 04:30 PM)Otter Wrote: I would take it one step further, too, and say there is a valid argument to be made that options with identical strikes/expiries, but purchased at different times, are not "substantially identical." Unlike stocks, options are time-limited, and value decay due to the running of time (Theta) is a very real driver of option value.

The risk profile of an option with two months on the clock is very different from an option with 30 days left. It is quite possible, in the context of options, to purchase an option within the wash sale period that is materially different from the "same" option when it was sold. Stocks don't really have that theta time decay component.

I suspect these complexities are one of the reasons the IRS hasn't published any rules.

(05-04-2021, 04:34 PM)fenders53 Wrote:

(05-04-2021, 04:30 PM)Otter Wrote: I would take it one step further, too, and say there is a valid argument to be made that options with identical strikes/expiries, but purchased at different times, are not "substantially identical." Unlike stocks, options are time-limited, and value decay due to the running of time (Theta) is a very real driver of option value.

The risk profile of an option with two months on the clock is very different from an option with 30 days left. It is quite possible, in the context of options, to purchase an option within the wash sale period that is materially different from the "same" option when it was sold. Stocks don't really have that theta time decay component.

I suspect these complexities are one of the reasons the IRS hasn't published any rules.

Oh you are really reaching now. Judge doesn't want to hear about no theta nonsense lol.  An AUG strike 50 is an AUG strike 50.  I'd pay to watch you argue that though.