Options Taxation and Calculations: Rapid Fire
Chapters in this video
- 0:00 Calls add, puts subtract breakeven rule
- 1:24 Buyer and writer share the same breakeven
- 2:08 Short put max loss is not unlimited
- 2:38 Spread quick-check: max gain plus max loss equals strike difference
- 3:13 Expiration versus exercise tax treatment
- 4:04 Big number barrage: 9, 39, 12, and the writer trap
- 5:45 Section 1256 contracts and 60/40 blended rate
- 6:21 December 31 mark-to-market and three-year loss carryback
- 7:02 Wash sales with options as substantially identical securities
- 7:54 Married put exception versus holding period destruction
- 8:19 Rapid-fire exam recap
What this video covers
- Why "calls add, puts subtract" gives the breakeven for any call or put, long or short, and why the buyer and writer share identical breakevens
- How to calculate max gain and max loss on naked options, spreads, straddles, and combinations, including why short put loss is capped at strike minus premium, not unlimited
- The debit spread and credit spread quick-check rule: max gain plus max loss always equals strike difference
- What happens taxwise at expiration versus exercise: capital loss or gain on expiration, zero option gain or loss on exercise, with premium folding into stock cost basis or sale proceeds
- Why writers of options are always short-term for tax purposes, even on Long-term Equity AnticiPation Securities (LEAPS) held for years, and why only the LEAPS buyer clears the 12-month long-term threshold
- Which contracts qualify for Section 1256 mark-to-market treatment, the 60/40 long-term/short-term blended rate, the December 31 deemed sale, and the three-year loss carryback that regular capital losses do not get
- How the wash sale 61-day window applies to options as substantially identical securities, and when the married put exception protects versus destroys the stock holding period
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