05-04-2021, 07:21 PM
(05-04-2021, 07:13 PM)NilesMike Wrote: THIS [How so?
Day 1 I purchase a call option that provides me the right to purchase 100 shares of T in 90 days (expiry August 1, 2021 for sake of this example) for $35/share (strike) if the price of T is above the strike price on August 1, 2021. I am ignoring early exercise for the sake of simplicity.
Day 30 I sell that call option to someone else for less than what I paid for it (need a loss somewhere in the relevant time period to trigger the wash-sale rule).
Day 60 I purchase a call option that provides me the right to purchase 100 shares in 30 days (expiry August 1, 2021) at $35 strike.
The call I purchased on Day 60 is not the same call I purchased on Day 1 and sold on Day 30. It is a completely different beast, and its pricing is driven by the short duration remaining on the call option (it is a weekly at that point, and likely priced very differently than it was on Day 1, if we are talking about anything other than edge cases like deep OTM/ITM options). ]
IS NOT THAT [If I sell a call option that gave me the right to buy 100 shares of T in 60 days for $35/share if T closes over $35 on that day, I have not sold any interest in T. I have sold a unique contract that provided me the right to purchase T 60 days in the future if the contract conditions were met. If, 30 days later, I buy a call option giving me the right to buy 100 shares of T in 30 days for $35/share if T closes over $35 on that day, I have purchased a very different contract due to the remaining expiry period at the time of purchase]
I understand your points but you may be confusing some readers by switching between buying and selling and insinuating that they both convey a right rather than obligation depending on buying or selling.
Additionally, an option does not become a weekly by having X amount of days left. An option chain is either a weekly or a monthly chain. Important in that often times a weekly does not have the volume to be very liquid. The liquidity is typically in the monthly. I just fat fingered a weekly instead of a monthly, getting in no problemo, now try to get out! No bueno even though the trade is up handsomely but no volume to fill me. ARRGH
Yeah, that paragraph in the originally quoted post wasn't clear. I was talking about selling the call option in the sense of selling to close for a loss a call that I had bought to open previously, to trigger the applicability of the wash-sale rule. Essentially, a poorly worded attempt to articulate what I describe on Day 30 in the subsequent post.
I also got sloppy calling them weeklies, but was trying to distinguish between an option purchased with 90 days remaining to expiry vs. something that wins or loses within 30 days. WSB has a crude term for OTM options expiring soon, but I was trying to avoid using it.