Does the Wash Sale rule apply to options trading?
If I buy and sell the stocks in a loss, can I still trade the call options for the stock within 31 days of selling?
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The wash sale rule applies to losses from equities and options but not commodity contracts or foreign currencies.
After a loss in the underlying, you can trade options as long as it's not a substantially identical position. So if you realize a loss on a long position in the underlying, you could buy a put but you could not buy a call because a call is substantially identical. Selling a put may or may not be substantially identical, depending on how deep in-the-money it is. This also applies in reverse, eg. a loss on an option and then taking a substantially identical position in the underlying.
There is nothing about the wash sale rule the prevents you from trading anything. The wash sale rule simply addresses how you deal with the taxes associated with the loss. If it is a wash sale (ie you sell for a loss and repurchase a similar investment within the 30 days) then you simply can not claim that as a loss on your taxes.
Under the rule if I have a security that I have a loss on and I want to write off that loss on my taxes I need to sell the security and not repurchase within the 30 day window. If I do purchase a similar investment within the 30 days I don't get to claim the loss.