USA Call Options and Taxes

Jan 10, 2015
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United States
Suppose an investor owns 990 shares of the XYZ stock with a large unrealized profit in the position. He then sells 10 calls against the position that are way out of the money. After some time be buys the calls back at a lose. I claim that if he had sold the calls deep in the money then he could not because that would be a hedge and it would not be a qualified covered call. In this case, since the calls were sold significantly out of the money, I claim that he has not formed a hedge and the loss in the calls can be deducted as a capital gain. Am I right?



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