Given the following, ignoring commission, etc.:
- On 2019-03-16, XYZ is trading for $100.00. I purchase 1000 shares, for a cost of $100,000.00.
- On 2019-09-15, XYZ is trading for $150.00. I sell 10 XYZ $175.00 (OTM) call contracts expiring in 15 days at a $0.50 premium, for a total of $500.00.
- On 2019-09-30, XYZ is trading for $160.00. The calls expire worthless.
- On 2020-03-17, XYZ is trading for $180.00. I sell all 1000 shares, for proceeds of $180,000.00.
I believe the expiry on 2019-09-30 generated $500.00 in short-term capital gains. I believe the sale on 2020-03-17 generated $80,000.00 of some kind of income.
- Did the sale on 2021-03-17 generate ordinary income, a short-term capital gain, or a long-term capital gain?
I can find lots of discussion on the web of "qualified covered calls" and their impacts on loss deferral. This call isn't qualified - it was sold less than 30 days before its expiry. I can find a few discussions of unqualified covered calls impacting Long Term Capital Gains holding periods, but always couched in terms of a call that was sold (possibly deeply) In The Money. I can find almost nothing on the impact of Out of The Money calls on LTCG holding. It seems logical to me that the call should have had no effect of my "ownership" position in the stock, and should therefore have had no effect on the running 1-year clock to generate a long-term gain, but the tax code is often not logical.