I sold a 17 July 2020 $250 strike put for $5.85 just as an exercise in trying to wrap my head around puts.
I planned to let it expire worthless, but wonder... under what scenario, if any, might I incur WASH rule tax issues if I was to buy it back right now to get rid of it?
Wrapping my head around puts isn't going so well for me, despite several great online tutorials...
By selling that $250 put, you became an insurer if you will - you sold a contract that says you will buy 100 shares of the stock for $250. The person buying the contract has acquired insurance - if their shares drop below $250 by expiration date, then they have the option (hence the term - option) that enables them to sell their shares to you for $250.
They paid you $5.85 to acquire that option.
If it helps, I think of put and call sales as me selling insurance to the downside and upside respectively. The people buying are acquiring insurance to the downside and upside respectively.
Or a different way to think of selling a put - if you're willing today to buy shares at the put strike, the difference between buying the shares today and selling the put at todays strike, is you're willing to be paid to buy the shares that you're willing to buy anyway.
Interesting anecdote - this is how I acquired my original TSLA position. I was willing to buy at the then price of ~29. But I sold that 29 strike for 1.70 and (thankfully) the share price was under 29 on expiration day. So I bought shares at 29 - 1.70 that I was willing to buy for 29. This also illustrates the risk - I was ready and willing to buy at 29 for long term buy and hold. If shares had ended at 30, then I wouldn't have acquired the shares. If I hadn't continued selling those puts (very possible), then 6 months later I'd have watched the start of that 30s to 180s stock move and missed out on it. It's important to understand the risk of a big move in either direction, and be ready for them.
For the WASH rule tax issues, I have no idea
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Hope this helps. If you haven't yet seen it, I strongly recommend the free option education at
www.optionalpha.com. There are 3 tracks which I think of as 1) option basics, 2) getting into a trade, and 3) getting out of a trade. 3rd party reviews I've read of that education universally agree with my assessment.
They are primarily talking about a particular option trading strategy that involves a lot of selling options. I'm not personally interested in the option strategy they're selling, but the education was critical to me getting started. I consider the knowledge from all 3 tracks to be the starting point (or equivalent) for selling options. That's also the assumed level of knowledge in the Applying option strategy "the wheel" to TSLA, elsewhere in this forum.