I took a decent loss on one trade. I'm hoping someone can help me clarify if my loss can be deducted on my 2020 taxes.

I am in the USA

Here are the trades -

  • 2/2 buy call option
  • 2/2 sell call option - profit
  • 2/4 buy call option
  • 2/4 sell call option - profit
  • 2/5 buy call option
  • 2/12 sell call option - loss
  • 2/27 sell shares obtained over 6 months ago for profit.

Is my loss on 2/12 disallowed as capital loss? I want to be sure because it was a good chunk of change.

  • Usa I update post as well.
    – Washsaleq
    Mar 1 '20 at 0:45
  • Are the options all on the same stock?
    – chepner
    Mar 2 '20 at 18:05
  • 1
    Since all the sales occurred within 30 days of each other, I think the "loss" is simply used to offset (retroactively or not) your other capital gains. Rather than gaining $X1 on 2/2, $X2 on 2/4, losing $Y on 2/12, and gaining $X3 on 2/27, you have net gains of (X1 + X2 + X3 - Y) across all three. I'm not sure of the ordering, though; is the loss used to offset the gains in their order of realization, or can you pick and choose (e.g., to offset short-term gains before long-term gains).
    – chepner
    Mar 2 '20 at 18:10

If there were no other positions taken when each open position was closed then there is no wash sale violation and no disallowance of capital loss.

The wash sale violation would only come into play if you had purchased replacement shares (including calls) within 30 days before or 30 days after the loss was realized and you still owned that position. That means that the loss on 2/12 opens you up for a wash sale violation until 3/14 should you take on another long position.

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