Hi all,
I'm contemplating whether it would make sense for me to close a covered call at a loss to offset short-term capital gains on a deep ITM long-term call option. Closing both of these positions would occur in 2026. I'm at the highest tax bracket.
I'd like to hold onto the shares that are currently used for the covered call until they're at least eligible for long-term capital gains, which would not be until sometime in 2027.
I know I'll need to be cognizant of wash sale rules in order to execute this without further issues.
The ticker for this is MU and as you may know, the stock price has gone up basically exponentially in the last few weeks, and my new thesis is that it'll continue to go up, potentially up to the $1000/share level in the coming months.
I'm just looking for any insight when trying to execute this strategy. TIA.
Looking for input on tax strategy: closing covered call at loss to offset short-term capital gains
byu/pantaloonsss inoptions
Posted by pantaloonsss
1 Comment
Tax loss harvesting on covered calls can make sense, but watch the wash sale rules if you reopen similar strikes within 30 days. I always check my true cost basis first because broker summaries often miss the full picture on rolled positions. I use Days to Expiry for FIFO trade matching so I know exactly where I stand before making any tax moves. What was your original strike and DTE on the position you’re considering closing?