Covered call wash sale. Therefore, the sale of the covered call option would not trigger the wash sale rule, even though you later assigned the option and sold the shares at a loss. It's only a wash sale if you sell the stock for a loss and then buy it back (either directly or via assignment of a short put) within the wash sale time window. This means that if you sell a stock for a loss and then buy a call option on the same stock within 30 days, the The wash sale rule applies to stocks, bonds, and mutual funds, but not to options. g. I don't think a selling a covered call option can be considered replacing the sale of the stock, but what I'm concerned with is the buying to close part in the rolling process, because I know that buying a covered call for a stock that sold within 30 days will incur a wash sale. If you sell 100 shares at a loss and buy a deep in the money call, you are likely triggering the wash sale rules. Oct 13, 2025 · Learn about the U. Learn how the wash sale rule impacts options traders using covered calls, puts, or collars—and how to avoid costly tax surprises with smart timing. Feb 16, 2025 · A covered call wash sale can result in a disallowed loss for tax purposes. See full list on fairmark. tax implications for call and put options, including short-term and long-term gains, exercising options, and covered call writing strategies. Not only is it a different security but it did not change the nature of your long shares by opening it or closing it. For options trading, such as rolling covered calls, it's a bit nuanced. I hate risk, which is why I study and embrace it. If the new position is considered "substantially identical" to the one you sold at a loss, it could trigger the wash sale rule. Feb 22, 2019 · It would not be a wash sale, it would be a straddle. , I bought 100 shares of the stock, sold a call, and was assigned out of the stock when someone exercised the call), can I buy more of that stock without triggering the wash sale rule if the overall trade was at a profit, but the stock assignment w Wash sales can become the unintended consequence of this stock acquisition strategy, especially while engaged in a covered call strategy or using short puts to reacquire the stock. If a call expires worthless, the net cash received at the time of sale Jan 5, 2019 · What I would offer as thoughts, not fact, is that buying back your $80 covered call to close does not trigger a wash sale. Mar 20, 2025 · Understanding the wash sale rule in options can save you from unexpected tax headaches. This summer, I rolled some AMC cash covered puts and Fidelity did not treat them as a wash sale. On the other hand, let's say I short the calls and the stock drops further and I'm not assigned, and then I sell the stock shortly afterwards. Former brokerage operations & mutual fund accountant. Will there be any tax implications from writing this covered call? I’d really like to avoid a wash sale. However, you would need to report the loss from the sale of the shares as a capital loss on your tax return. S. Jul 1, 2023 · If I'm assigned out of a covered call position (e. Apr 18, 2019 · It can trigger a wash sale but the wash sale should not apply? Here's the opinion from GreenTrader, a very reliable tax source of tax issues for investors and traders. There are different tax treatments depending if the call was written deep-out-of-the-money or not. If I do not exit this trade by December 31, will my wash sale losses be deferred to next tax year? Meaning I cannot deduct losses for 2022 but CAN for tax year 2023? May 17, 2021 · If I sell an ITM covered call with a strike price of $8 and I gain say a $1 of premium then my loss will be $3 per share. It has been years since I have had do this. None of the covered call ending scenarios by themselves trigger the wash sale rule. Rolling a covered call means you're closing the current position and opening another one, often with a different strike price or expiration date. Does wash sale apply to options like calls and puts? What are the key tax implications, and how can you avoid wash sale issues? This guide tells you more about what traders need to know on wash sale options and strategies to stay compliant. Feb 6, 2004 · Ask Bev: Looking at Wash Sales, Covered Calls The rules for selling shares for a loss to qualify for a tax benefit are a bit tricky. Dec 23, 2022 · I have had losses using call options and currently in a trade - covered call strategy with the same stock. I haven’t purchased any more of the underlying stock and won’t be doing so for 31 days after writing the call. com Mar 28, 2024 · Q: Which securities are covered by the wash sale rule? Generally, if a security, such as stocks, exchange-traded funds (ETFs), and mutual funds, has a CUSIP number (a unique nine-character identifier for a security), then it's most likely subject to the wash sale rule. Would my 2 days ago · The wash sale rule prevents investors from claiming tax deductions on securities sold at a loss and then quickly bought again. . Tax treatment of covered calls According to Taxes and Investing, the money received from selling a covered call is not included in income at the time the call is sold. Income or loss is recognized when the call is closed either by expiring worthless, by being closed with a closing purchase transaction, or by being assigned. oukx d2jz m9zyeiu b7r llxt xtocqghs erz a2pnp vgu rrxigj