Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 05-17-2023, 10:57 AM   #521
Recycles dryer sheets
 
Join Date: Feb 2009
Posts: 183
I've been selling options for a bit less than a year now and it's been great fun. I recently started selling in my taxable and came across some interesting tax information I thought I'd share.

Selling covered calls can reset (terminate) or pause your holding period calculation for long term gains on the stock itself.

This Reddit post has the best explaination I've seen on the subject.

The big takeaway for me is, if you have held the stock for less than 12 months and sell a non-qualified covered call on it, you've reset your holding period. I rarely due calls over 14DTE so my calls are non-qualified.

The cherry on top of all of this is that it appears most brokerages don't do any accounting for you on this. You need to keep track of that options have reset or paused which lots of stocks.
__________________
Sometimes, I think it's a shame
When I get feelin' better, when I'm feelin' no pain - Gordon Lightfoot
Golden Mean is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-17-2023, 11:35 AM   #522
Full time employment: Posting here.
Happyras's Avatar
 
Join Date: Jun 2015
Location: Redmond
Posts: 892
Odd this never comes up as a negative to the covered call strategy for income. https://retirecertain.com/how-far-ou...covered-calls/
I keep all of our calls in retirement accounts and avoid all the tax record issues......
Happyras is offline   Reply With Quote
Old 05-17-2023, 03:18 PM   #523
Thinks s/he gets paid by the post
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 1,554
I was fairly active selling covered calls from 2014 - 2016. Used cobra insurance from retirement (mid 2015) through 2016.
In 2017, I went on a high deductible ACA health insurance plan, so I had to limit the number of calls sold as the additional income would've put me over the income cliff that existed back then. For those 3 years I earned around $14K in additional income.

That could've been substantially higher, but I made one big mistake. Sometime in 2015, Eli Lilly went up around 15% in one day.
I immediately sold covered calls on 200 shares. The duration was around 3 months. A week or 2 later, the FDA announced positive results on a drug Lilly had in the pipeline. I had to spend (lose) around $7000 to re-purchase the options before my shares were called away.

It was painful at the time, but I'm lucky I did, because Lilly shares have exploded over the past 5 years.
I'm not an expert @ this, but if I was to give advice to anyone looking to start doing it themselves, that would be to stick to non-pharma stocks.


These days I only sell them when something extraordinary happens.
Own 185 shares of first solar (FSLR) with a cost basis in the mid 30s.

Friday May 12, they announced an acquisition, + favorable news regarding solar subsidies was released.
To say the stock price reaction was euphoric, might be an understatement.





Sold one covered call contract. Could’ve received a much higher premium selling a call closer to being ‘in the money’ but I didn't want to take a chance of losing them, as I believe the company has a bright future.





As myself & others suspected would happen, underlying shares have drifted down to around $210
The option is now trading under $2

__________________
"No beast so fierce but knows some touch of pity, but I know none, therefore am no beast"
Shown @ The End Of The Movie 'Runaway Train'
ownyourfuture is offline   Reply With Quote
Old 05-26-2023, 04:20 AM   #524
gone traveling
 
Join Date: May 2023
Location: Nope
Posts: 166
Forgive me... I thought naked shorts were illegal, not permitted? Oh, OK. The thread title talks about naked PUTS.
GhostofTomJoad is offline   Reply With Quote
Old 05-26-2023, 04:12 PM   #525
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,010
Quote:
Originally Posted by GhostofTomJoad View Post
Forgive me... I thought naked shorts were illegal, not permitted? Oh, OK. The thread title talks about naked PUTS.
That's ok, I keep misreading the title and think it says naked putts , and wonder who goes golfing naked
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 05-27-2023, 05:48 AM   #526
Recycles dryer sheets
 
Join Date: May 2023
Posts: 52
Inspired by this thread, I have dipped toes in to Covered Calls with 5 stocks that I intend to hold. Just started this (in April) as a way to supplement income once retired in next year to year and a half. I'd like to outline my thoughts on this strategy/plan and see how it aligns with those that have been at this a lot longer and that are much more experienced with Options. I am now looking at cash covered Puts to accomplish my stated strategy below of reallocating position across more sectors. So far:

~$500k in positions allocated to this "income strategy"
Avg DIVS - $1,766/mo
Avg Options - $5,162/mo
Total Avg "Income" - $6,928/mo

I am going to decrease holdings in these 5 stocks to allow same overall position value with 5 additional stocks to add some sector diversity.

I am trying to "ignore" for the most part the position swings in overall value (other than what I would do with any stock as far as decision making on hold, sell, buy) and only looking at the "income" side. I am also looking at beta of 1 or less average for the 10 positions once I have re-allocated.

Open to thoughts/suggestions.
Flieger is offline   Reply With Quote
Old 05-28-2023, 12:59 PM   #527
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 180
Just started in April so your numbers are extrapolated from only two months? I've tried options on less volatile stocks but the premiums are not attractive enough for farther strike prices so I end up choosing strikes very close to market. The downside of course is higher chances of getting assigned. Being low beta, these stocks can take a while to recover so I am stuck with a few (hundreds) which means opportunity lost to generate income.
Now I like the idea of buy-write (deep ITM calls) on SPY which I learned from Happyras here. Then one may lose big if the market has a sudden drop.
tutan is offline   Reply With Quote
Old 05-28-2023, 03:56 PM   #528
Recycles dryer sheets
 
Join Date: May 2023
Posts: 52
Quote:
Originally Posted by tutan View Post
Just started in April so your numbers are extrapolated from only two months?
Yes, only 2 months, but those are the actual numbers.
Flieger is offline   Reply With Quote
Old 05-28-2023, 04:05 PM   #529
Full time employment: Posting here.
Happyras's Avatar
 
Join Date: Jun 2015
Location: Redmond
Posts: 892
Quote:
Originally Posted by Flieger View Post
Yes, only 2 months, but those are the actual numbers.
Pretty decent return, it would be interesting to see what VIX was on your buy/write day and when you roll the option. Low VIX I expect a 6% annual time premium, but with higher volatility a 16% annual rate is possible, at least that what I see trading them on SPY.
Happyras is offline   Reply With Quote
Old 06-01-2023, 08:01 AM   #530
Thinks s/he gets paid by the post
 
Join Date: Aug 2010
Posts: 1,089
Covered calls are very difficult strategy for me. The upper profit is limited, and the downside loses are great. I have done CCs in the past but always regretted it.

Now that I am retired and in need to cash out some holdings for expenses, I will do some CCs with those shares that I intend to sell anyway.
fh2000 is offline   Reply With Quote
Old 06-04-2023, 04:58 AM   #531
Recycles dryer sheets
 
Join Date: May 2023
Posts: 52
Quote:
Originally Posted by fh2000 View Post
Covered calls are very difficult strategy for me. The upper profit is limited, and the downside loses are great. I have done CCs in the past but always regretted it.

Now that I am retired and in need to cash out some holdings for expenses, I will do some CCs with those shares that I intend to sell anyway.
What did you regret about your CC's?

I am only doing CC's with strike price above my basis, and 2-3 weeks out. I have rolled a couple when it made sense, continued to be profitable, but I am not married to any of the stocks which I do CC's on, so it's ok if they are assigned.

I had a Put that was assigned Friday, so now have additional shares that I planned to buy at some point anyway. Ex-Div is Monday, so I will get that Div's and put a CC in just a little outside of my basis and see if I can get income 3 ways on the one. Fingers crossed.
Flieger is offline   Reply With Quote
Old 06-04-2023, 07:15 AM   #532
Thinks s/he gets paid by the post
 
Join Date: Aug 2010
Posts: 1,089
Quote:
Originally Posted by Flieger View Post
What did you regret about your CC's?

I am only doing CC's with strike price above my basis, and 2-3 weeks out. I have rolled a couple when it made sense, continued to be profitable, but I am not married to any of the stocks which I do CC's on, so it's ok if they are assigned.

I had a Put that was assigned Friday, so now have additional shares that I planned to buy at some point anyway. Ex-Div is Monday, so I will get that Div's and put a CC in just a little outside of my basis and see if I can get income 3 ways on the one. Fingers crossed.
Around the time when Apple came out with first iPhone, I put aside $25K for Apple stock, and $25K for Google stock. I sold CC later on both and only saw both stocks started to fly high. I rolled both up and out a couple of times until no more strikes to roll up to. This is the risk of rolling up and high.

I wanted to buy back the CCs but waited until time value was almost diminished. I was able to buy back Google CC and shelled out total $40K loss. Today, those shares worth a lot more.

But Apple call owner exercised before expiration, and my shares got called away. I made 100% profit on Apples shares. Had I just kept the shares without messing with it, I would have at least $500K worth of Apples instead of pittance return of $25K.

You could say that I made a mistake doing CC on high flying stocks, or I was too slow to buy back the CC to keep the stock. But the maintenance of this strategy requires active monitoring. This is harder than I thought. So, I no longer try to do CCs for small profit.
fh2000 is offline   Reply With Quote
Old 06-04-2023, 11:22 AM   #533
Recycles dryer sheets
 
Join Date: Feb 2009
Posts: 183
I agree it can be a bit of a trial managing CCs.

I've had a number of stocks that sat 10-15% below my cost basis. I could either sit and wait or I could sell CCs with a strike below my basis. Most times that I decided to sell CCs below my basis, the stock would rally and I'd be scrambling to roll up and out. If I succeeded, usually the math worked out that I should have just waited for the stock to recover before selling a CC (ie buying to close, rolling up and out netted almost no net gain).

All that said I think I've done well. I've gotten between 5% and 10% in 30 to 80 days on most of my CC/stock deals.
__________________
Sometimes, I think it's a shame
When I get feelin' better, when I'm feelin' no pain - Gordon Lightfoot
Golden Mean is offline   Reply With Quote
Old 06-09-2023, 09:54 AM   #534
Recycles dryer sheets
 
Join Date: May 2023
Posts: 52
Looks like this may be a down month (June). I rolled one stock at a loss (income from CC Options) to avoid a Call below my basis which tanked me so far. I'm not sure how to model it since with the roll, my overall will be positive (if it's called, my increased CG on the position will outweigh the CC Option loss), but when I am looking at the "income from options" side of it, I like to ignore the unrealized positions valuation. I guess the main thing is to ensure my overall value is on the green side....

Once June is at or near over, I will update the numbers above. I am sure the average will come down.
Flieger is offline   Reply With Quote
Old 06-13-2023, 02:12 PM   #535
Thinks s/he gets paid by the post
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 1,554
Own 1008 shares Direxion Daily Semiconductor Bull 3X Shares (SOXL)
Cost basis $13.77

Sold 2 CC contracts today. JUL 14 2023 $27 @ $1.63

My reasoning is that it's basically doubled in one month (see screen cap)
and may have gotten ahead of itself.



__________________
"No beast so fierce but knows some touch of pity, but I know none, therefore am no beast"
Shown @ The End Of The Movie 'Runaway Train'
ownyourfuture is offline   Reply With Quote
Old 06-14-2023, 10:28 AM   #536
Recycles dryer sheets
 
Join Date: Feb 2009
Posts: 183
I don't see an image. Attaching one here.

Good luck with the contracts!

One a side note, I moved $$ from TQQQ(3x etf Nasdaq100ish) to SSO(2x etf s&p 500ish) due to similar feelings.
Attached Images
File Type: jpg 2023-06-14_092438_892982593.jpg (21.8 KB, 8 views)
__________________
Sometimes, I think it's a shame
When I get feelin' better, when I'm feelin' no pain - Gordon Lightfoot
Golden Mean is offline   Reply With Quote
Old 06-14-2023, 09:35 PM   #537
Thinks s/he gets paid by the post
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 1,554
Quote:
Originally Posted by Golden Mean View Post
I don't see an image. Attaching one here.

Good luck with the contracts!

One a side note, I moved $$ from TQQQ(3x etf Nasdaq100ish) to SSO(2x etf s&p 500ish) due to similar feelings.
Not sure why you couldn't see the image ?
I see it was up again today. If you add after hours trading, it's only around $.20 away from the strike price of $27

Nvidia has been beyond belief. It's been single-handedly carrying my IRA & I only have about 30 shares!

Sure looks like an A-I generated bubble (even Intel has been caught in the updraft) but who knows ?

Good luck with your move as well.
__________________
"No beast so fierce but knows some touch of pity, but I know none, therefore am no beast"
Shown @ The End Of The Movie 'Runaway Train'
ownyourfuture is offline   Reply With Quote
Old 07-08-2023, 06:47 AM   #538
Recycles dryer sheets
 
Join Date: May 2023
Posts: 52
So, as I thought, June was tough. Had several calls exercised after trying to roll, etc. had some gain from those and the options overall, but definitely impacted my average and now have cash in SPAXX that I am waiting to redeploy for some other options driven stocks. Still have a few good dividend stocks (monthly) that have started July OK. Here's a snippet of the April and May hoorah, and the June carnage.

For some reason Name Blocks not pulling in it goes top to bottom:
>Called Stock Gain/Loss (small font)
>Options Income/Loss
>Divs Income
>Total

AVG AO is (After Options Start)
Attached Images
File Type: png OptionsSummary.png (46.6 KB, 27 views)
Flieger is offline   Reply With Quote
Old 07-13-2023, 01:45 PM   #539
Thinks s/he gets paid by the post
ownyourfuture's Avatar
 
Join Date: Jun 2013
Posts: 1,554
A couple questions:
Assuming they don't drop in tomorrow's session, it looks like 200 shares of SOXL will be called away.
(See post 535 above)

When this happens, is the standard FIFO method used ?
That would be ideal in my case as I bought my first 200 shares on 2022-06-10 @ $18.80, by far the most I paid for any of the 4 lots I purchased.

Follow up question: What if that wasn't the case ?
If I had paid more for 1 of the lots I purchased later, could I choose to have those called away ?

Thanks in advance.
__________________
"No beast so fierce but knows some touch of pity, but I know none, therefore am no beast"
Shown @ The End Of The Movie 'Runaway Train'
ownyourfuture is offline   Reply With Quote
Old 07-14-2023, 10:28 AM   #540
Recycles dryer sheets
 
Join Date: Feb 2009
Posts: 183
Quote:
Originally Posted by ownyourfuture View Post
A couple questions:
Assuming they don't drop in tomorrow's session, it looks like 200 shares of SOXL will be called away.
(See post 535 above)

When this happens, is the standard FIFO method used ?
That would be ideal in my case as I bought my first 200 shares on 2022-06-10 @ $18.80, by far the most I paid for any of the 4 lots I purchased.

Follow up question: What if that wasn't the case ?
If I had paid more for 1 of the lots I purchased later, could I choose to have those called away ?

Thanks in advance.
I believe it depends on your broker. For Vanguard you have to call and tell them which shares to take (or they default to fifo). Some brokers you can do it on the website, maybe when you sell the covered call?
__________________
Sometimes, I think it's a shame
When I get feelin' better, when I'm feelin' no pain - Gordon Lightfoot
Golden Mean is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
PUTS and CALLS SpartacusSchmartacus Active Investing, Market Strategies & Alternative Assets 58 10-23-2018 11:04 AM
Selling Cash-Covered Puts atfourty Active Investing, Market Strategies & Alternative Assets 15 03-01-2014 09:54 AM
Shorts, puts, calls Cal FIRE and Money 8 08-23-2005 06:01 AM
Covered call/naked put writing on ETFs? Olav23 FIRE and Money 8 07-15-2005 10:50 AM

» Quick Links

 
All times are GMT -6. The time now is 04:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.