The tax rules applied when you write in-the-money covered calls are exceptionally complicated. There are several rules to keep in mind to determine whether your in-the-money covered call is qualified or unqualified.

With a qualified covered call, your stock does not risk losing its long-term capital gains status; if the covered call is unqualified, then treatment of stock profits changes as a consequence.

You had large losses in your portfolio in the years and However, by selling in-the-money covered calls you create numerous short-term profits, both in calls and in stock exercised against your in-the-money short calls.

You view this as one way to shelter short-term profits. Current-year gains are applied against the large carryover loss, so you have no net tax consequences this year.

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You wrote google stock ticker symbol covered calls last week.

Example A Math Challenge: You own shares of stock in several corporations. You want to write covered calls in the money, but you tax treatment of call options exercised to ensure that all are qualified.

To qualify a covered call, it must be one striking price below that level, or 70, if the call is set to expire within 31 to 90 days.

If the call is set to expire beyond the day limit, you can write a call two striking prices below the prior day's close, which is the 65 call. If you write any in-the-money calls tax treatment of call options exercised than these, they will be unqualified.

Tax Treatment For Call & Put Options | Investopedia

Example Coming Up Short: You have owned shares of stock for 11 months. You write an unqualified covered call, and your long-term holding period is suspended.

Tax Ramifications in Trading Options - bozunoteyuta.web.fc2.com

Three months later, the call is exercised and you give up your stock at a profit. Even though you owned the stock for 14 months, your gain is treated as short term. You sold an unqualified covered call, so the period required before long-term rates apply is suspended.

Tax Treatment For Call & Put Options | Investopedia

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Four Ways to pay for a Higher Education. One striking price below prior day's closing stock price Exception: Two striking prices below prior day's closing stock price but not more than 10 points in the money.