I have started to trade opportunity spreads, credit spreads to be exact. Since most of the positions are short term, do you know how they are tax?
Answers: The IRS uses the term "straddle" to describe an selection spread.
The taxation is covered in IRS Publication 550. See the following section:
Short Sales . . . . . . . . . . . . . . . . . 54
Wash Sales . . . . . . . . . . . . . . . . . 55
Options . . . . . . . . . . . . . . . . . . . . 56
Straddles . . . . . . . . . . . . . . . . . . . 57
The primary objective of the straddle rules is to prevent you from claiming a realize loss on one leg of a spread while you still have an unrealized gain on another leg of the spread. A minor objective is to prevent the holding interval of a security from including time that a position is hedge.
Taxes on spreads are usually short-term capital gain or losses, assuming you are not a professional trader. If you are a professional trader, and you make the mark-to-market see, none of the above applies.
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Answers: The IRS uses the term "straddle" to describe an selection spread.
The taxation is covered in IRS Publication 550. See the following section:
Short Sales . . . . . . . . . . . . . . . . . 54
Wash Sales . . . . . . . . . . . . . . . . . 55
Options . . . . . . . . . . . . . . . . . . . . 56
Straddles . . . . . . . . . . . . . . . . . . . 57
The primary objective of the straddle rules is to prevent you from claiming a realize loss on one leg of a spread while you still have an unrealized gain on another leg of the spread. A minor objective is to prevent the holding interval of a security from including time that a position is hedge.
Taxes on spreads are usually short-term capital gain or losses, assuming you are not a professional trader. If you are a professional trader, and you make the mark-to-market see, none of the above applies.
Resolved Questions: