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Pfizer Inc. Message Board

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  • tobyt001 tobyt001 Dec 21, 2012 12:35 PM Flag

    Replacement investment for maligned financials naked put-writing portfolio

    how do you handle the taxes on 2012 since you received 4,365 dollars...and what do you do
    on 2014 with the taxes....

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    • I pay no taxes whatsoever until the position is closed out - probably in Jan. 2014. Either I'll buy back the contracts for a song in early Jan. 2014 or I'll let them expire worthless - assuming that C doesn't go below $23 a share (it's over $39 now).

      Selling options short is the reverse of what happens when you buy a stock or options. When you buy stock or options, no taxes are paid until the position is closed out with a sale. With naked puts, it's the sell side that comes first. Later on, the position will be closed out with a buy or allowing the options to expire worthless. In either case, no taxes are due until the position is closed out. How can I pay taxes when I don't know what the profit will be? The mere selling of put options is NOT a taxable event; a taxable event occurs only after there has been a sale AND a closeout buy or the options expire worthless.

      Moreover, since I'm selling the puts in December 2012 and won't close them out until Jan. 2014, my gains will be LONG-TERM gains and those gains which will be bookwed in January 2014 will mean that I'll have until April 15, 2015 to give Uncle Sam his cut.

      Sentiment: Buy

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