AAPL Options Strategy

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    Posted: 23 August 2012 09:04 PM #751

    cambrose - 23 August 2012 11:34 PM

    Is this right?

    Nevermind. Figured it out. No, it is not correct.

    It appears the tax is front-loaded. Didn’t consider things properly.

    Using my example, lets say the long call is now worth $150k, the short leg will be $100k. The gain on the long call is 100k. The buy-back cost of the short call is $100k and the net is zero. No tax.

    Thinking helps sometimes smile

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    Long AAPL Short ME 5’3

         
  • Posted: 23 August 2012 09:28 PM #752

    cambrose - 23 August 2012 08:52 PM

    I’ve got a call into my accountant, but do any Canadians here know the tax obligations for options gains/losses?

    Are options trades still considered as capital gains (50% inclusion rate)?
    Can one apply losses against gains?

    Did a little more digging online and found this…

    http://www.taxtips.ca/personaltax/investing/taxtreatment/options.htm

    Appears that you can apply losses against gains but there are a number of complicating issues. I love the last word…

    Tax Tip:  Leave option-trading to the professionals.

    Thats why i do only TFSA and RRSP for options

         
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    Posted: 24 August 2012 01:46 AM #753

    I’m using the spread calculator here.

    http://www.optionsprofitcalculator.com/calculator/call-spread.html

    Here’s the top row for a 690/700 results in summary (I’m typing, not cut and paste)

    .............AUG  SEPT ......... MAR  APR
    761.25  
    ==   61.6  62.7 .......  161   167 

    the pop-up window says for the 167

    Trades to close position    No.    Price    Total
    sell 20th Apr 2013 
    $690.00 Call    1x100    $71.25    $7125.00
    buy 20th Apr 2013 
    $700.00 Call    1x100    $61.25    $-6125.00
    Total 
    (closing trade)    $1000.00
    Initial outlay    
    $-375.00
    Total    
    $625.00 

    still feeling my way around

         
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    Posted: 25 August 2012 03:48 AM #754

    Not sure I like the BCS with long term expirations plan. If the tax is front-loaded, that could make for a pretty large tax bill and a long time to wait to realize the gains.

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    Posted: 30 August 2012 03:30 AM #755

    Is this how the tax works for BCSs in the US as well? Seems to me like a big deterrent to using them.

    JD was saying you can’t deduct losses either (which makes absolutely no sense to me) so I’m guessing our tax laws are quite different.

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    Posted: 30 August 2012 10:12 AM #756

    cambrose - 30 August 2012 06:30 AM

    Is this how the tax works for BCSs in the US as well? Seems to me like a big deterrent to using them.

    JD was saying you can’t deduct losses either (which makes absolutely no sense to me) so I’m guessing our tax laws are quite different.

    I am by no means a tax pro, but the following is how I understand things to be in the U.S. When computing taxes, each leg is treated as a separate transaction. When you open a spread (BTO long-leg and STO short-leg), there are no gains/losses to be reported to the IRS yet, because there hasn’t been a closing transaction yet, just two opening ones. Only when a leg is closed are you taxed and you have to calculate your gain/loss.

    For a LEAP spread, I believe that the long-leg can get long-term cap gains treatment (as long as you hold for a year), while the short-leg gets treated as a short-term gain, no matter how long you hold that short position.

    That’s my take on the laws, if someone else has a different understanding, feel free to chime in and correct me.

    BTO: Buy to open
    STO: Sell to open
    IRS Tax Rules on investments

    [ Edited: 30 August 2012 10:14 AM by nkmho ]      
  • Posted: 30 August 2012 10:25 AM #757

    nkmho - 30 August 2012 01:12 PM
    cambrose - 30 August 2012 06:30 AM

    Is this how the tax works for BCSs in the US as well? Seems to me like a big deterrent to using them.

    JD was saying you can’t deduct losses either (which makes absolutely no sense to me) so I’m guessing our tax laws are quite different.

    I am by no means a tax pro, but the following is how I understand things to be in the U.S. When computing taxes, each leg is treated as a separate transaction. When you open a spread (BTO long-leg and STO short-leg), there are no gains/losses to be reported to the IRS yet, because there hasn’t been a closing transaction yet, just two opening ones. Only when a leg is closed are you taxed and you have to calculate your gain/loss.

    For a LEAP spread, I believe that the long-leg can get long-term cap gains treatment (as long as you hold for a year), while the short-leg gets treated as a short-term gain, no matter how long you hold that short position.

    That’s my take on the laws, if someone else has a different understanding, feel free to chime in and correct me.

    BTO: Buy to open
    STO: Sell to open
    IRS Tax Rules on investments

    You have it mostly correct—except for your point about the short leg getting treated as a short-term GAIN. It can also generate a short-term LOSS.

         
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    Posted: 31 August 2012 06:12 AM #758

    I have a question for the more experienced here.

    I have 6 Jan 14 835/850 BCSs I paid about $2.3 for.  While checking closing strategies, I noticed that if I bought back the 6 $850 calls and sold 6 $840 calls I would net about $2000 that would cover my initial $1400 investment plus a $600 gain and leave me 6 Jan 14 835/840 BCSs at zero cost.

    I know this reduces my potential profit from ~ $7600 to ~1600 at expiration, but it frees up my original $1400 investment plus a gain of $600 leaving me about $2000 for reinvesting and I still have 6 zero cost Jan 14 BCSs.

    Pre market is down so maybe today isn’t the best time for this but does the principle of this seem sound?

    [ Edited: 31 August 2012 06:24 AM by rickag ]

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 31 August 2012 06:30 AM #759

    nkmho - 21 March 2012 05:14 PM
    rickag - 21 March 2012 04:57 PM

    I’m looking at Tradeking which seems to have the lowest fees.

    FYI, I tried out TradeKing recently, and didn’t like them very much. Their new interface never worked on my browser, and order execution and cancellation sucked. If I ever wanted to cancel or modify an order, there was always this lengthy lag of about 30-60 seconds. Plus, they also jacked up their rates on options recently. I ended up moving all my money away from them.

    I ended up using Trademonster for trading.  Seems to be working out well.

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 31 August 2012 08:11 AM #760

    rickag - 31 August 2012 09:12 AM

    I have a question for the more experienced here.

    I have 6 Jan 14 835/850 BCSs I paid about $2.3 for.  While checking closing strategies, I noticed that if I bought back the 6 $850 calls and sold 6 $840 calls I would net about $2000 that would cover my initial $1400 investment plus a $600 gain and leave me 6 Jan 14 835/840 BCSs at zero cost.

    I know this reduces my potential profit from ~ $7600 to ~1600 at expiration, but it frees up my original $1400 investment plus a gain of $600 leaving me about $2000 for reinvesting and I still have 6 zero cost Jan 14 BCSs.

    Pre market is down so maybe today isn’t the best time for this but does the principle of this seem sound?

    Yes. smile

         
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    Posted: 31 August 2012 08:56 AM #761

    lovemyipad

    Thank you,  pre market up slightly I might set a bid up.

    Gotta love this forum.

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 31 August 2012 03:50 PM #762

    rickag - 31 August 2012 09:12 AM

    I have a question for the more experienced here.

    I have 6 Jan 14 835/850 BCSs I paid about $2.3 for.  While checking closing strategies, I noticed that if I bought back the 6 $850 calls and sold 6 $840 calls I would net about $2000 that would cover my initial $1400 investment plus a $600 gain and leave me 6 Jan 14 835/840 BCSs at zero cost.

    I know this reduces my potential profit from ~ $7600 to ~1600 at expiration, but it frees up my original $1400 investment plus a gain of $600 leaving me about $2000 for reinvesting and I still have 6 zero cost Jan 14 BCSs.

    Pre market is down so maybe today isn’t the best time for this but does the principle of this seem sound?

    Oppps

    I rechecked my numbers and buying back the 6 $850s and selling 6 $840s at the current mark $2.33 only comes out to $1382.60 that almost covers the original investment of $1395.  To get $2000 the mark would have to be $3.33 and AAPL would have to be about $747.  Still at the current mark I could end up with a zero cost BCS, not bad.

    [ Edited: 31 August 2012 04:02 PM by rickag ]

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 11 September 2012 02:44 PM #763

    I had 2 bids fill @ 1:05 pm
    2 Jan 13 665/680 BCSs at $6.84 and 2 Jan 13 685/700 BCSs @ $5.82.

    Both have $15 spreads giving me some flexibility and I have cash to cover to buy more if AAPL drops to the $630 to $650 range or below.  My goal is to buy back the short legs and sell shorts to turn them into BCSs with only a $5 spread, lowering my cost basis and pulling out cash. 

    I don’t expect this to be the bottom but felt I could invest just in case and still have security to buy lower if needed.

    Hope I didn’t make a mistake with Jan 13 expiration.

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    Waiting to be included in one of Apple’s target markets, but I still own an iPod, iPhone and iMac and APPL stock.

         
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    Posted: 12 September 2012 10:16 AM #764

    I found this :
    Cycle 1: Monday, September 17, 2012: January 2015 LEAPS® listed
    Cycle 2: Monday, October 15, 2012: January 2015 LEAPS® listed
    Cycle 3: Monday, November 12, 2012: January 2015 LEAPS® listed

    When actually APPL 2015 LEAPS will be available?

         
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    Posted: 12 September 2012 11:19 AM #765

    Tullio - 12 September 2012 10:16 AM

    I found this :
    Cycle 1: Monday, September 17, 2012: January 2015 LEAPS® listed
    Cycle 2: Monday, October 15, 2012: January 2015 LEAPS® listed
    Cycle 3: Monday, November 12, 2012: January 2015 LEAPS® listed

    When actually APPL 2015 LEAPS will be available?

    AAPL is cycle 1.

    (My avatar is crying over the forum changes.)

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