Lets say I have a stock with holding period of 1+ year and is in profit. For some reason I dont want to sell it now but also hedge my gains. If I but a deep ITM put (assuming very small/negligible extrinsic value and expiry is few weeks from now), after few weeks here are the two scenarios:
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Stock goes further up, put goes in red. Does selling both put and stock at this point means stock gains are LTCG and put loses are considered Short Term?
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Stock goes down, put goes in green. If I exercise the put at this point, what will my sell price be?
2.a – Put strike – cost of put OR
2.b – Current stock price? In this case, my put has gained value. will that be considered short term gain?
Tax – Short term loss in options against long term gain in underlying
byu/lifestartsat40 inoptions
Posted by lifestartsat40
1 Comment
The way the tax code deals with short vs long term gains is that a short term loss offsets short term gains first and then carries to long term gains.