4aapl
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Post by 4aapl on May 14, 2015 6:08:34 GMT -8
However, correct me if I am wrong, but spreads are never taxed as long-term cap gains, unlike straight options, not even LEAPs... This is what I asked about last week, since the tax pubs and a tax book I've ready suggest that (well, more than that, they give examples) spreads are taxed differently, and they use the straddles rules (rose by another name). But, it's looking like thus far they haven't really been taxed that way. And now with brokerages reporting the cost basis and tax status, both TDA and GainsKeeper are putting the long side of the leap spread as long term, and short side as short term. They should be even more familiar with the tax code than me, so I'm going to stick with that. BTW, there's other even more strange things out there, like if you hold options for something like the S&P, it gets taxed as 60% LT 40% ST no matter your holding period. Look it up first to make sure, but that's a strange one I hope to utilize sometime. Plus there's info on why the short side always stays short term (you never held the stock/investment), and things that hit me like your holding time resetting when an option expires in the money and rolls over to shares. Anyhow, to me the important thing is how brokerages and gains keeper report things. And it makes sense to me, since IMO they shouldn't be straddles since they are not fully offsetting and still have risk. I know none of my spreads have been risk free.
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4aapl
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Posts: 3,635
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Post by 4aapl on May 14, 2015 6:23:59 GMT -8
There's always things going on. Sometimes they get enough shock or attention to cause some spooking. More often they are the scapegoat for normal market moves. For regular stock holdings, I wouldn't worry about spooky short-term events. But for options, there's always the time issue, if the spook happens at an inopportune time, you can get slaughtered. It's like hurricanes versus earthquakes. One you can prepare for, boarding up windows and such, and the question is if it's intensity is going to get bigger or smaller, and what vector it is going to take. But with an earthquake, you just never know when it's going to strike, as the people driving on the Bay Bridge when a big quake hit and a section fell out can attest. I think it's important to keep an eye on them, and it's great if you can determine something small that is going to turn into something big on the worry wall. But it can consume you. There was a timeframe where I was "putting in" 40-60 hours, just watching the market and reading everything I could. I had large investments and made nice money, but really for the most part all this watching wasn't changing anything I was doing. I had stock and spreads, and just needed to let them play out. It was good to do a little babysitting, but really most of that time was wasted, and life wasted. So now I try to mostly stay away. It's better for me to get outside and get some fresh air or get things done. And that might mean that most of the time I need to stay away from weeklies, but often those are a crap shoot at most to any risk/reward since a surprise event can move a stock or the market 2-5% and wipe out the position. But if you spread it out, say buying 2 weeks out on a monthly basis, with something ITM, you can counter those surprises and then attempt to preserve some of the capital by jumping out when there are those spikes down.
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mark
fire starter
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Post by mark on May 14, 2015 6:56:08 GMT -8
For regular stock holdings, I wouldn't worry about spooky short-term events. But for options, there's always the time issue, if the spook happens at an inopportune time, you can get slaughtered. It's like hurricanes versus earthquakes. One you can prepare for, boarding up windows and such, and the question is if it's intensity is going to get bigger or smaller, and what vector it is going to take. But with an earthquake, you just never know when it's going to strike, as the people driving on the Bay Bridge when a big quake hit and a section fell out can attest. I think it's important to keep an eye on them, and it's great if you can determine something small that is going to turn into something big on the worry wall. But it can consume you. There was a timeframe where I was "putting in" 40-60 hours, just watching the market and reading everything I could. I had large investments and made nice money, but really for the most part all this watching wasn't changing anything I was doing. I had stock and spreads, and just needed to let them play out. It was good to do a little babysitting, but really most of that time was wasted, and life wasted. So now I try to mostly stay away. It's better for me to get outside and get some fresh air or get things done. And that might mean that most of the time I need to stay away from weeklies, but often those are a crap shoot at most to any risk/reward since a surprise event can move a stock or the market 2-5% and wipe out the position. But if you spread it out, say buying 2 weeks out on a monthly basis, with something ITM, you can counter those surprises and then attempt to preserve some of the capital by jumping out when there are those spikes down. Wow, 40-60 hours is like a full-time job! I spend max an hour a day on investing, and usually a LOT less. I don't trade very often and I stay away from weeklies, that's just gambling. HOWEVER, when there is a dip, and when there is a price I've identified that I am willing to buy more stock, I will sometimes sell some short-term puts at that price. For example, right now, I'm short a bunch of May 15th 115 puts that look like they will expire worthless and I won't be getting my stock at 115. Also had some Feb puts expire worthless, and in January, presumably, my 64.29 puts will also expire worthless - those I really thought would get me shares at net 400 (I sold them for about 50 bucks which would bring my net cost to 400), instead, when nobody exercised them on me, I had to go out and BUY shares the usual way between 395 and 405 back then.
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