A Tax Strategy for Options Trading
No Thought to the Taxes
All of the options trading material I have ingested has not discussed how to optimize your taxes in regards to options trading. This topic needs discussion because taxes and options are a pain in the ass. To the point where for small timers, I would consider quitting the options trading practice simply because preparing the taxes can be horrendous. Options trading can be terribly chaotic and inefficient in regards to taxes.
Wash Sale Strategy Idea
I can report one strategy idea here that might be useful. I have found that continuously trading a single option ticker can result in the losses being forever carried forward perpetually. If you take a big loss and want it to show up on your taxes next year, you can pause trading in that instrument until the wash sale rule elapses (30 days). For example, I lost $5K on an AMZN trade and I figured it would be better for it to show up on my taxes this year. So I cleared my portfolio of AMZN for 30+ days. In the extreme example, I can go 100% to cash for a month and let my entire portfolio be realized gain or loss next tax season.
Just an Idea
Time will tell if this strategy helps me keep my gains and losses orderly during tax season. Remember that your losses are carried forward, so it is not like they go away. You might make some money next year to deduct them against. I have been noticing that I get extreme swings in tax obligations sometimes and that can be straining on the finances. Perhaps that is where realizing your taxed gains and losses purposefully can help.