Just an update for those following along - I've scheduled time to talk with a consultant from Anderson Advisors on Monday morning. The woman who helped me schedule went through the consultant/lawyer's background which I found interesting.
He's a tax planning lawyer for the past 20 years, but also someone who uses the same strategies he will discuss with me for his own personal investments. He doesn't just talk the talk, but walks the walk.
This first meeting is free - so I'll take copious notes. If this group has any questions they'd like me to ask (that are general enough to be relevant for all/most/those in WA at a minimum) I'm happy to ask and report back.
If it's not too late, my question is about precisely what constitutes a trade.
It's a technical term and that matters. We've clarified from enough different sources that I am confident that an open and a close are 2 trades. So a position is a trade to get in, and a trade to get out.
Therefore rolling is also 2 trades as a roll is closing an existing position and opening a new position.
But then it gets interesting. Is each contract in an option trade ticket a trade, or is the entire ticket a trade? If I sell 10 covered calls in a single transaction is that 10 trades or 1? I just assumed 1 but I COULD do 10 orders for 1 contract each.
@UltradoomY has at least one opinion that he trusts and is acting on that each contract is 1 trade. So open and close 10 CC would be 10 trades each, for a total of 20 trades.
Then a second question - is a spread position 1 trade or 2? A put spread is made up of selling a put and buy a different put (1 long plus 1 short put). At least at Fidelity that goes into my trade history as 2 trades - purchase of the one and sale of the other. And it gets reversed when the spread is closed. Which turns into - if I sell to open 10 put credit spreads (made up of 10 long puts and 10 short puts) and then later close that put spread, do I have 2 trades (first question), 20 trades (10 spreads to open, 10 spreads to close), or 40 trades (10 long puts to open and 10 short puts to open, followed by 10 long puts to close and 10 short puts to close).
I assume it's true for most of us - I know that its true for me - each contract being a trade will make it easy for me to qualify as a trader, at least for setting up a business(es) around this activity. Especially with spread trading - that can turn into a lot of contracts fast. But if it's trade tickets then assuming 4 trades per day, 4 days per week (700+ per year), then I'm nowhere close and not going to get there.
And ideally - if that person can provide a link / reference / etc.. to case law or other appeal to authority the IRS would listen to that supports the answer. One thing that seems quite clear to me is that whatever the answer is, this isn't a locked and loaded / everybody knows the answer and it's only the ignorant that don't know it.
So if I go down this road, I want to have some stuff already in place in case of audit to demonstrate why what I'm doing is reasonable and defensible.
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