Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-10-2014, 01:01 PM
Junior Member
 
Join Date: Jan 2014
Posts: 1
Stock options (selling puts)

I'm trying to estimate the effect of taxes on profits from selling puts. When you sell (write) a put, you create the obligation (if assigned) to purchase the underlying stock. For this obligation, you collect a premium.

So for example: I sell one contract of XYZ for .90, which immediately puts $90 in my pocket. I assume this is going to be subject to normal income tax, not capital gains. Is this a correct assumption?

Now, if the underlying stock remains such that I'm not assigned the stock, I keep the premium, and the option expires. However, if the stock drops below the strike price, I am likely to be assigned the stock, which means I'm buying the stock at significantly higher than today's price. If I immediately sell the stock (at a loss), do wash sale provisions negate the 'value' of the loss (say I lost $100 on the transaction, can I deduct the FULL loss, or do I offset the loss with the $90 premium?)?



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Implications of selling puts wpkluck Estimated Taxes 1 01-10-2014 02:43 PM
Stock Options [email protected] Capital Gains 0 02-27-2013 10:05 PM
Selling 100k stock to find a private loan.. can I avoid a huge lump tax? kandi1331 Investment Strategy 3 06-29-2011 05:41 PM
Do I have to report exercised options ? status1 Capital Gains 0 01-16-2011 08:59 PM
What are my options if I can't pay my 2006 tax liability? Melissa Miscellaneous 0 03-20-2007 06:05 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning