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Tax Loss Harvesting - Sanity check


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Its that time of year - i wanted to sanity check a couple of maneuvers/scenarios with folks here to make sure I'm not triggering a wash sale, constructive sale or any other IRS troubles.


 - Scenario One - 

Step 1 - Sell XYZ stock for $65, cost basis of $85 for long term capital loss

Step 2 - Sell an OTM 1 year put option.....$55 strike

Step 3 - Buy back XYZ after 31 Days


From what I can gather its all good if sold put is OTM......any 15% banding rules here? Could I fly closer to $65 current price and just ensure the put excercise date is outside the 31 days?


-Scenario Two-

Short Position (temporarily hopefully) gone wrong......but with juicy short term capital losses to use up


Step one - Buy to cover XYZ stock at $100, cost basis was $50....good short term losses

Step Two - Sell Calls on XYZ stock with $125 strike (does call expiration even matter here??)

Step Three - After 34 days (31 days + 3 day time taken to deliver shares to broker) sell short XYZ stock again to recreate orginal short position


Any thoughts on Scenario Two above?


Also posting some links I've found in other threads & web broadly that have proven useful lest anyone else is playing around with tax loss harvesting options right now:



Strategies to Help Clients Around the Wash Sale Rule | Nasdaq



Wash Sales and Options – Fairmark.com


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I had a somewhat bearish market viewpoint heading into Q4 (taper/4th delta wave hitting north east where I have some NYC reopening plays) so realizing some gains against some losses was a way to express that - its turned out to be somewhat right so far but lets see in a few more weeks…..also the things I’d sold had good reporting windows i.e. not reporting earnings inside my 31 day window so more likely just to ebb & flow with the beta. Finally some of the option positioning I outlined above, seems to from my research, allow me to participate in bearish/bullish moves in a somewhat similar way but without triggering wash sale rules given their OTM levels and/or contract expiry.

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40 minutes ago, benchmark said:

can you sell a stock at a loss, and buy a long term option within 30 days? for example, if one sells 100 shares of BABA today at a loss, can one buy 1 contract of Jan 24 BABA $125 option? does that trigger the wash sale rule? 

I was wondering the same thing this evening, from what I’ve read the answer is yes. An option to buy the same security is similar enough. 

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