Replies to post #135183 on Biotech Values

[dav1234]

Thanks,good to know, the way I was reading it appeared even puts triggered tax gain,hope to need such a tax hedge soon as my little walnut company nears a critical news event,lol

[biomaven0]

the rule is that if you are past the first out of the money strike this is not deemed a constructive sale.

Yes, a so-called "qualified call" is exempt from the 1092 straddle rules:

A qualified covered call option is any option you grant to purchase stock you hold (or stock you acquire in connection with granting the option), but only if all the following are true.
The option is traded on a national securities exchange or other market approved by the Secretary of the Treasury.

The option is granted more than 30 days before its expiration date.

For covered call options entered into after July 28, 2002, the option is granted not more than 12 months before its expiration date or satisfies term limitation and qualified benchmark requirements published in the Internal Revenue Bulletin.

The option is not a deep-in-the-money option.

You are not an options dealer who granted the option in connection with your activity of dealing in options.

Gain or loss on the option is capital gain or loss.

A deep-in-the-money option is an option with a strike price lower than the lowest qualified benchmark (LQB). The strike price is the price at which the option is to be exercised. Strike prices are listed in the financial section of many newspapers. The LQB is the highest available strike price that is less than the applicable stock price. However, the LQB for an option with a term of more than 90 days and a strike price of more than $50 is the second highest available strike price that is less than the applicable stock price.

If you ever end up having to deal with the straddle rules, your head is going to spin.

Peter