Consider a situation where an investor owns a stock for over a year and sells calls against it that expire in about 90 days. You can assume that this is a qualified covered call for tax purposes.
After some time, the calls are deep in the money and the investor is about to get assigned on the calls. If assigned on the calls he will have a 10K long term capital gain. If he buys the calls back he will have a 5K short term loss. If he just sells the stock he will have a 15K long term capital gain. Assuming the investor already has other short term capital gains then from a tax point of view he is better off buying back the calls and selling the stock out right.
Do I have that right? I am also assuming that since he was short the call option for less than a year the loss in the calls would be considered short term. Is that right?