An investor owns a stock portfolio consisting of 200 stocks each from the S&P 500 index with a significant amount of unrealized gains. He then sells calls on the S&P 500 index at the money. 100 days later, he buys back the calls at a loss. Is the loss currently deductible against other gains he has taken?
I believe it is, but if the position I described is viewed as a straddle than I believe it would not be.
Note: For more information regarding this issue you can look at a PDF which can be found at the following URL: https://www.gpo.gov/fdsys/pkg/FR-1995-03-20/pdf/95-6693.pdf . You can search for the phrase:
Where Risk of Loss Diminished