Wash Sale Rule and Options

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Chapters in this video

  1. 0:00 The IRS bouncer and the fake-loss problem
  2. 1:11 The 61-day danger zone (30 + 1 + 30)
  3. 3:02 Zombie losses: deferred basis and tacked holding period
  4. 4:02 Calls, deep-ITM puts, and the substantially identical trap
  5. 5:44 Broad-based index options and the 60/40 getaway car
  6. 7:00 Rapid-fire exam recap

What this video covers

  • Why the wash sale window is 61 days (30 before, day of, 30 after) and not the 30-day trap answer the test writers love
  • What happens to a disallowed loss: it is added to the cost basis of the replacement position and the original holding period tacks on
  • Why buying a call, buying a deep-in-the-money call, or writing a deep-in-the-money put on the same stock within 30 days of a stock loss IS a wash sale
  • The three safe harbors: waiting past day 30, selling at a gain, or buying a genuinely different company
  • Why broad-based index options, foreign currency options, and yield-based options are generally exempt thanks to 60/40 marked-to-market treatment
  • How to spot the classic exam scenario of selling stock at a loss then buying an S&P 500 (SPX) option versus an individual equity option
  • The Internal Revenue Service (IRS) framing of "substantially identical" and why options count as stock in disguise for this rule

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