What are you buying today?

[stockman500]

LUNRW 

The stock is around $100 atm while the warrants are at a dollar. The spac has just merged. 

I repeat, the stock is sitting around $100 while the warrants are at $1.00

 

What am I missing here?

 

From what I've read, redemption is possible within 60 days for the warrants at $11.50. This is basically a bet the stock will stay higher than that price by the time redemption comes around. I think the stock will definitely come down but should still be above $10.00. Parabolic rises don't deflate that quickly imo.

Edited February 23, 2023 by stockman500

[Stuart D]

How long do you have to wait?

[stockman500]

I think only a month after merger completion for the warrants to be exercisable, merger completion happened last week. I might be reading the SEC filings wrong though. 

[RedLion]

Sold June 2024 calls against half my OXY/WS with strike prices at $70 and $85. 

[StevieV]

JOE

[longlake95]

HCG - merger arb

[RedLion]

Opened new positions in PM, MO, and BTI in my 401k with employer contribution that just hit my account. Also added to my CLPR position at 6.75 in the 401k. 
 

I have room to add a lot to these tobacco names if prices fall, but I’m trying to move yieldcos into my retirement accounts, been waiting to add tobacco until I got funds in tax advantaged accounts. 

 

 

Also began a starter position in Trisura in taxable acct. 

Edited February 23, 2023 by RedLion

[Saluki]

A little more OXY and TV on the dip.  I still like SWBI at this price, but I have as much as I'm comfortable owning (it would be higher but gun companies, like tobacco, don't make sympathetic defendants and civil suits are always a looming threat that is not quantifiable). 

[boilermaker75]

On 2/21/2023 at 2:37 PM, lnofeisone said:

Bought OSTK LEAPs and sold OTM calls to capture vega crush. The premiums are very juicy. 

 

I've been selling puts, 1-day to 1-week out.

[LearningMachine]

12 hours ago, RedLion said:

Sold June 2024 calls against half my OXY/WS with strike prices at $70 and $85. 

 

@RedLion, you probably know this already, but it was a surprise for me to learn: even if call options are longer than one year, upon expiry, the amount you sold them for is subject to short term capital gains.

Edited February 24, 2023 by LearningMachine

[Paarslaars]

Started a position in BTI, added to GOOG.

[RedLion]

10 hours ago, LearningMachine said:

 

@RedLion, you probably know this already, but it was a surprise for me to learn: even if call options are longer than one year, upon expiry, the amount you sold them for is subject to short term capital gains.

I didn’t know this! isn’t it different for put options? I could swear I’ve gotten lt gains before. Thank you!

[RedLion]

More CLPR

[Saluki]

More TV and OXY

[CassiusKing1]

More BRK.

[aws]

On 2/24/2023 at 9:12 AM, RedLion said:

I didn’t know this! isn’t it different for put options? I could swear I’ve gotten lt gains before. Thank you!

 

Options writing are short sales, and short sales are always short-term, no matter whether they are puts, calls, or direct short sales of stock. It also doesn't matter if you close the position early, if it gets assigned, or if it expires worthless. For tax purposes the day any of those happen is considered the day you acquired the position for tax purposes. Even if you closed a short position you had for 10 years it would still show on your tax form that it was acquired and closed on the same day.

 

Short puts that get assigned leaves you with stock, but your holding period starts of the day it was assigned and not on the day you originally sold the put, so you have to wait a full year after that to get LTCG treatment.

[dpetrescu]

Bought more Autodesk LEAPs expiration in 2025. Price is still so expensive but a lot less expensive after the market didn’t like their guidance. I could care less about guidance for the next quarter or two. This company just keeps increasing revenues and earnings and I think will keep doing so for decades more. Happy to pay for quality, although it would be nice to have a clearance sale….maybe one day, I can hope

 

Might also buy some more Simpson if it dips under $100.

 

Also just started a new position in Tyler Technologies. Owned it for a couple years and was stupid to sell. Every time I listen to Munger at the DJC meeting, I get a renewed excitement about Tyler. Again - expensive - but it will be less expensive in 5 years and beyond.

 

Common theme for both Autodesk and Tyler - public agencies move at the pace of a snail. But once they commit, that snail pace becomes (can’t think of an animal that’s 1% the speed of a snail). 

Edited February 25, 2023 by dpetrescu

[gfp]

On 2/22/2023 at 8:23 PM, stockman500 said:

LUNRW 

The stock is around $100 atm while the warrants are at a dollar. The spac has just merged. 

I repeat, the stock is sitting around $100 while the warrants are at $1.00

 

What am I missing here?

 

From what I've read, redemption is possible within 60 days for the warrants at $11.50. This is basically a bet the stock will stay higher than that price by the time redemption comes around. I think the stock will definitely come down but should still be above $10.00. Parabolic rises don't deflate that quickly imo.

 

Check in with the SKYH and SKYH.wt warrant holders on how this trade worked out for them.  Buyer beware in a SPAC short squeeze.  The warrants *might* be the rationally priced security...

[RedLion]

@aws @LearningMachine 

 

Thank you so much for teaching me this lesson before I figured it out sometime next tax season! I closed out the 2024 short calls for a small profit and I’ll look for either a higher IRR short term option (still short some August 23 calls) or none at all. 

[lnofeisone]

19 hours ago, aws said:

 

Options writing are short sales, and short sales are always short-term, no matter whether they are puts, calls, or direct short sales of stock. It also doesn't matter if you close the position early, if it gets assigned, or if it expires worthless. For tax purposes the day any of those happen is considered the day you acquired the position for tax purposes. Even if you closed a short position you had for 10 years it would still show on your tax form that it was acquired and closed on the same day.

 

Short puts that get assigned leaves you with stock, but your holding period starts of the day it was assigned and not on the day you originally sold the put, so you have to wait a full year after that to get LTCG treatment.

@RedLion is selling calls against his existing warrants. IRS treats warrants as options, so he is creating straddles. Straddles aren't taxed at short-term gains.

 

To add to this is that he is selling LEAPs that are offsetting his warrants. If he holds those LEAPs and his warrants until June 2024, he will qualify for long-term capital gains tax. 

 

The trick for both is to make sure that number of sold calls doesn't exceed the number of warrants/100. 

 

Pug 550 - section "Short Sales" - https://www.irs.gov/pub/irs-pdf/p550.pdf

 

[aws]

3 hours ago, lnofeisone said:

@RedLion is selling calls against his existing warrants. IRS treats warrants as options, so he is creating straddles. Straddles aren't taxed at short-term gains.

 

To add to this is that he is selling LEAPs that are offsetting his warrants. If he holds those LEAPs and his warrants until June 2024, he will qualify for long-term capital gains tax. 

 

The trick for both is to make sure that number of sold calls doesn't exceed the number of warrants/100. 

 

Pug 550 - section "Short Sales" - https://www.irs.gov/pub/irs-pdf/p550.pdf

 

 

I could be out of my depths a little since I've never dealt with straddles, but my understanding of straddle rules were that they are to prevent you from getting a more favorable tax treatment than you would otherwise be entitled to by using offsetting positions. Such as going long and short the same stock or option and closing only the losing side right before the end of the year and keeping the winning side for a tax deferral, or by doing the same right before one side becomes long-term to have a low tax rate gain and an ordinary loss. So if he closed the short call at a loss he could not deduct the loss until he sells the warrant, and the short-term loss might be converted to a less favorable LT loss.

 

So are you saying you basically treat the short call and long warrant as a single transaction with whatever the net cost basis is? It would be great if it works, I'm just not understanding the mechanics of it. Do both legs of the position have to be opened on the same day?

 

 

[RedLion]

I’m going to ask my cpa and just sit on the long warrants right now. I’ve done this before with bull leap spreads and I believe had lt treatment but now I just don’t know. 

[lnofeisone]

2 hours ago, aws said:

 

I could be out of my depths a little since I've never dealt with straddles, but my understanding of straddle rules were that they are to prevent you from getting a more favorable tax treatment than you would otherwise be entitled to by using offsetting positions. Such as going long and short the same stock or option and closing only the losing side right before the end of the year and keeping the winning side for a tax deferral, or by doing the same right before one side becomes long-term to have a low tax rate gain and an ordinary loss. So if he closed the short call at a loss he could not deduct the loss until he sells the warrant, and the short-term loss might be converted to a less favorable LT loss.

 

So are you saying you basically treat the short call and long warrant as a single transaction with whatever the net cost basis is? It would be great if it works, I'm just not understanding the mechanics of it. Do both legs of the position have to be opened on the same day?

 

 

If you sell the losing leg, you can't use that loss to offset anything until you close all legs of your trade. It was updated that way for the very reason you called out (and traders used to do just that). Timing and option pricing (atm, itm, otm,) nuances can matter in some cases but doesn't look like it in this case. For example, married put implies you buy the atm put the same day you buy the stock and if you lose $ on the put, you have to add the cost of the put to the cost basis of your stock. In other words, can't take capital loss on the put. There is lots to keep track off and you can designate all the tax lot assignent with your broker as you trade but most just defer to defaults. 

[RedLion]

New position in NTDOY. In at 9.52. 

[Castanza]

BRK.b