I'm in timeout ala @mickle , margin only until I can rebuild cash reserves. Adding the straddle learnings to the toolkit, I suppose a BPS could satisfy the CSP side of the straddle? It'd be a bit more sensitive and harder to roll, requiring watching the price, maybe not worth the while?
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Wiki Selling TSLA Options - Be the House
- Thread starter adiggs
- Start date
Best assumption is that a BPS can NOT be used as the put side of a straddle. Yes there's a short put in there, but the actual dynamics of a spread are way, way different from the dynamics of a csp.
EVNow
Well-Known Member
I've reading up on wash sales for options. There are basically 2 arguments...
- Call options including LEAPs are "substantially similar" to stocks and thus if you buy them within 31 days of a loss sale, it becomes a wash sale. There was a specific amendment in 1998 that introduced contracts and options, so this argument has a strong basis.
- Stocks and Calls have different risk profiles and are thus not substantially similar. Especially OTM calls do not let you buy the stock unless it becomes ITM. I see this argument in some websites ... But nothing concrete to back up the argument.
What we need to settle this argument is some case law or tax lawyers who have argued before IRS and won/lost the argument.
There is also the practical aspect. If your brokerage thinks something is a wash sale and sends the document to you and IRS, and when you file you don't mark it as a wash sale, then the filing will probably get flagged and audited. Then you have to prove that you are correct and IRS is wrong. So, I think in practical terms, anything the brokerage says is a wash sale is probably considered a Wash sale for practical purposes.
So, has anyone had this kind of situation in the past and what does your brokerage say ?
- Call options including LEAPs are "substantially similar" to stocks and thus if you buy them within 31 days of a loss sale, it becomes a wash sale. There was a specific amendment in 1998 that introduced contracts and options, so this argument has a strong basis.
- Stocks and Calls have different risk profiles and are thus not substantially similar. Especially OTM calls do not let you buy the stock unless it becomes ITM. I see this argument in some websites ... But nothing concrete to back up the argument.
What we need to settle this argument is some case law or tax lawyers who have argued before IRS and won/lost the argument.
There is also the practical aspect. If your brokerage thinks something is a wash sale and sends the document to you and IRS, and when you file you don't mark it as a wash sale, then the filing will probably get flagged and audited. Then you have to prove that you are correct and IRS is wrong. So, I think in practical terms, anything the brokerage says is a wash sale is probably considered a Wash sale for practical purposes.
So, has anyone had this kind of situation in the past and what does your brokerage say ?
Would love to see us spike to the 2's. I didn't want to risk a nice down, sold 60% , will sit the side line. Good luck to all. HNY 2023 ,!!!!
I'll admit I'm not actually super familiar with these overviews, but bullish flow for puts would have to be sold puts right? 1/20/23 is an expiry with a lot of deep ITM puts, would these likely just be closing of some of those? I guess bullish, but more just seems like "Someone always knows... when to take their gains and go home"
One of the most interesting post to start 2023. If I need to roll my 20% OTM CCs next week I will be the happiest post-capitulated investor ever. Happy new year everyone and enjoy every second of life!
I've been an active options trader for years and never experienced it. I assume it's been rare. Maybe part of the problem is the sheer quantity of options trades needed to make a profit each year that neither exchange/broker, trader, IRS, and I bet CPA can keep up with it. It's an area of concern though. We'll see if the newly added 87000 IRS agents have more to say about it.
EVNow
Well-Known Member
You mean you have never been audited or never experienced wash sale or ....
I get my tax filed by a tax firm. They file according to what the broker reports. IRS software compares what is filed vs what is reported. If there are big differences, my guess is, it will be flagged.
This year Fidelity is flagging one large loss in the beginning of the year as a wash in investment account because of an assignment in the IRA. I'll have to see how my tax firm handles that ...
Thank goodness never audited. Unfortunately options trading and wash sales are almost a given.
I want to clarify a bit on the recent discussion about short straddles or strangles (SS), so that people don’t think I’m only advocating for those. My use of these in the past has been because of my lack of margin or a trading platform that allowed spreads, plus my inability to time trades or accurately guess SP direction, short- or long-term. I know that we all make our own decisions, but that there can be a small amount of herd mentality on this thread. In 2021 we witnessed lots of people profitably trading BPS, which then turned into disaster in 2022. I think (but don’t know for a fact) that some options/spreads are more profitable when the SP is rising vs stable or dropping as follows:
Rising SP: BPS (bull put spread), BCS (bull call spread), buy calls
Stable SP: IC (iron condor), short straddle, short strangle (SS)
Falling SP: bps (bear put spread), bcs (bear call spread), buy puts
I have just dipped my toes into trading spreads (a single IC) for the learning and so far I am not impressed with my experience and emotional response. At this point, I realize that timing and direction (definitely not my strong points) are very important. Furthermore, the risks are inherently greater and the premium lower per contract, thus requiring more contracts and therefore more brokerage fees. Sure, when done well there’s the potential to clear 5-10% per week. Who wouldn’t be seduced by such returns? With poor timing or direction, well, decimation or total asset destruction. I feel my trades would result in the latter.
Once again, I don’t know what the SP action will be in 2023 and will continue to hedge my trades with this in mind. I hope and believe that the SP will rise in 2023, maybe even back to 300-400, so I will be slightly hedging in this direction, but could be wrong both short- and long-term. Worst case for short straddles is that the SP runs hard in one direction (likely up from here) and the winning side cannot fully compensate for the losing side. For example, if the SP closes up $50 this week, my puts gain $8, but my calls lose $45. Even if I roll out perfectly, at $5/wk it’s a LONG time to recover that. Furthermore, TSLA has a way of continuing direction week after week (Hertz). Remember, selling CCs at a SP of $125 and buying them back at $175 is selling low and buying high. Ouch.
Rising SP: BPS (bull put spread), BCS (bull call spread), buy calls
Stable SP: IC (iron condor), short straddle, short strangle (SS)
Falling SP: bps (bear put spread), bcs (bear call spread), buy puts
I have just dipped my toes into trading spreads (a single IC) for the learning and so far I am not impressed with my experience and emotional response. At this point, I realize that timing and direction (definitely not my strong points) are very important. Furthermore, the risks are inherently greater and the premium lower per contract, thus requiring more contracts and therefore more brokerage fees. Sure, when done well there’s the potential to clear 5-10% per week. Who wouldn’t be seduced by such returns? With poor timing or direction, well, decimation or total asset destruction. I feel my trades would result in the latter.
Once again, I don’t know what the SP action will be in 2023 and will continue to hedge my trades with this in mind. I hope and believe that the SP will rise in 2023, maybe even back to 300-400, so I will be slightly hedging in this direction, but could be wrong both short- and long-term. Worst case for short straddles is that the SP runs hard in one direction (likely up from here) and the winning side cannot fully compensate for the losing side. For example, if the SP closes up $50 this week, my puts gain $8, but my calls lose $45. Even if I roll out perfectly, at $5/wk it’s a LONG time to recover that. Furthermore, TSLA has a way of continuing direction week after week (Hertz). Remember, selling CCs at a SP of $125 and buying them back at $175 is selling low and buying high. Ouch.
i've been thinking hard about my strategy going forward
my biggest fear is sp dropping ~100: we are still in a bear market, the TWTR overhang is perpetual now, the daily MMD is still there, and who knows what big institution is going to cash out next
yes, there are predictions of a short-term bounce, but i will believe it when i see it
i guess it will be
my biggest fear is sp dropping ~100: we are still in a bear market, the TWTR overhang is perpetual now, the daily MMD is still there, and who knows what big institution is going to cash out next
yes, there are predictions of a short-term bounce, but i will believe it when i see it
i guess it will be
- no Monday trades; this day is extremely volatile
- 3DTE ITM B/W with trailing stop loss on the temp shares and the B/W
- 1DTE bcs or bps, by this time it will be clear what p/c walls are targets (and Fridays are +/-8% OTM the last 2 yrs)
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perhaps you can try Short Strap Straddle (bearish) or Short Strip Straddle (bullish)
Market is closed tomorrow
Are you meaning that you will not be trading on Tuesday due to the volatility post P&D?
yes, i meant no trading on Day 1 (%OTM is too large and higher chance of getting a position wrong)
EVNow
Well-Known Member
Thanks for the reference. Inadvertently, that’s exactly what I was doing after the first week of the SP dropping. I started at 1:1 p/c ratio, rolled down as the SP dropped, released more cash as the CSP strike was lowered, rage bought shares with the premium, and sold an extra CC. After three months of this, I was nearly 1:2 p/c, a definite Short Strap Straddle. Now, I really want to keep the extra shares on the way back up. I’ll just add the earned premiums to the CSP side ($500 per contract must be added for every $5 rise in SP, which is what I hope we’ll see in 2023, $125 + $5x52 = $385 by EOY). I’m lucky (or good), there might be enough extra cash to add an additional CSP every month or so. Slow and steady back up to $400 and I’m buying a new Plaid in 2024.
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EVNow
Well-Known Member
Hmmm .... congratulations to all those who sold calls on Friday.
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