What Did You Buy Today?

[fenders53]

(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.