| There is no requirement to mart to market. It is an election to mark to market. --- On Wed, 2/3/10, Kenneth Ginsberg <ken_ginsberg@
|
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Wednesday, February 3, 2010
RE: [TheOptionClub.com] Some clarification on 1256 tax treatment
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RE: [TheOptionClub.com] Re: Has anyone tried this for TOS Commissions?
From: OptionClub@yahoogro
Sent: Wednesday, February 03, 2010 10:33 AM
To: OptionClub@yahoogro
Subject: [TheOptionClub.
Hey Guys,
I live in Canada and TOS is owned by TD Waterhouse here which is a separate division of TD Ameritrade from the USA. I asked if they will wave the the $7.50 minimum charge per leg. Since I am still learning the ropes I only trade 1 contract per leg and I primarily do Iron condors. I am ok with the $1.50 per contract charge but they refused to wave the $7.50 minniumum. The best they offered was $5 minimum per leg which still adds up to a lot of money when you trade only 1 contract per leg on an iron condor.
Is anyone here from Canada that has had better success then I did with TOS? Also, do any of you guys have pull with the heads up at TOS where we might be able to get them to bend the min. charge rules for their Canadian subsidiary?
Any help would be greatly appreciated. Thanks.
--- In OptionClub@yahoogro
>
> Mike,
>
> Basically what happens when you're assigned on a cash index option is
> that for every point it is in-the-money $100 is deducted from your
> account. So, if you have a 10 point spread the worse case scenario is a
> $1,000 deduction per spread sold. It's really not that big of a deal so
> long as you are managing your risk and not trading to much size. The
> cash deduction is no different that the account debit you experience
> when closing the position.
>
> Most of the cash index options are European style, meaning that they
> cannot be exercised early but there are some that are American style and
> that offer early exercise potential. For details on the specific
> options you're trading head on over the the CBOE website.
>
> Christopher Smith
> TheOptionClub.
>
> --- In OptionClub@yahoogro
> wrote:
> >
> > Thanks Chris,
> >
> > These are index options. I learn by doing, so I trade live, just very
> tiny position sizes, so that I can understand what is happening in the
> live market. I had no plan for getting assigned on the short options, I
> only had plan to manage the portfolio by keeping delta neutral, which
> has indeed happened so far.
> >
> > Mike
> > P.S. I just trade with TOS regular commission schedule, for the reason
> mentioned below.
> >
> >
>
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OptionClub-unsubscribe@yahoogroups.com
Re: [TheOptionClub.com] Re: Has anyone tried this for TOS Commissions?
IB is still better in Canada. Use TOS to do tech and other analysis and use IB to trade.
TOS took forever to reduce mine in the US and $1.50 is too high in the US. With enough trades and large enough account they give some break.
Not sure if eOptions is in Canada. They are $3 per ticket plus $0.10 per contract. You can do the math as to at what number of contract levels you break even.
Iron Condors of 5 contracts will cost $5.00 with eOptions and 2 contracts will cost $3.80 - with eOptions. I am not a big fan of these complicated strategies - they never make money with high commissions. If you can make with condors, flies, you can still do the same with spreads, simple options, ITM covered calls, ATM CC etc. Trade what makes money, do not go by what Optionetics, Dan and other gurus have to say. Learn the strategies and better yet learn to repair.
Good luck, v
---
V. Kapil
http://twitter.
Hey Guys,
I live in Canada and TOS is owned by TD Waterhouse here which is a separate division of TD Ameritrade from the USA. I asked if they will wave the the $7.50 minimum charge per leg. Since I am still learning the ropes I only trade 1 contract per leg and I primarily do Iron condors. I am ok with the $1.50 per contract charge but they refused to wave the $7.50 minniumum. The best they offered was $5 minimum per leg which still adds up to a lot of money when you trade only 1 contract per leg on an iron condor.
Is anyone here from Canada that has had better success then I did with TOS? Also, do any of you guys have pull with the heads up at TOS where we might be able to get them to bend the min. charge rules for their Canadian subsidiary?
Any help would be greatly appreciated. Thanks.
--- In OptionClub@yahoogro
>
> Mike,
>
> Basically what happens when you're assigned on a cash index option is
> that for every point it is in-the-money $100 is deducted from your
> account. So, if you have a 10 point spread the worse case scenario is a
> $1,000 deduction per spread sold. It's really not that big of a deal so
> long as you are managing your risk and not trading to much size. The
> cash deduction is no different that the account debit you experience
> when closing the position.
>
> Most of the cash index options are European style, meaning that they
> cannot be exercised early but there are some that are American style and
> that offer early exercise potential. For details on the specific
> options you're trading head on over the the CBOE website.
>
> Christopher Smith
> TheOptionClub.
>
> --- In OptionClub@yahoogro
> wrote:
> >
> > Thanks Chris,
> >
> > These are index options. I learn by doing, so I trade live, just very
> tiny position sizes, so that I can understand what is happening in the
> live market. I had no plan for getting assigned on the short options, I
> only had plan to manage the portfolio by keeping delta neutral, which
> has indeed happened so far.
> >
> > Mike
> > P.S. I just trade with TOS regular commission schedule, for the reason
> mentioned below.
> >
> >
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
RE: [TheOptionClub.com] Some clarification on 1256 tax treatment
It is my understanding (and I am not an accountant, so my suggestion is to check with one that is familiar with this area of the tax codes) that if you have elected (and the IRS does not challenge) trader status, you would never have a 1256 issue, because all transactions are considered inventory moving in and out of your trading accounts on a short term basis, they are marked to market at year end as if you sold them on 12/31 and a new cost basis is started, and there is no long/short capital gains issues. The real benefit is you will no longer be subject to the maximum $3000 year loss writeoff on your income taxes each year, if you lose 25,000 this year then $25,000 is your loss. It becomes a schedule C (business) issue not a schedule D (investments) issue and nowhere on schedule C will short/long term capital gains be considered.
As I said, check with a reliable knowledgeable accountant, but for some people even if they qualify for trader status, depending on what type of trading they do, they may be better off without it.
Also, note, that you can elect trader status for the actual trading business you run, and that can be separate and apart from any personal "investments" you have which would continue to show up on your schedule D. In other words, you can have both trading accounts and investment accounts. As in any business you need to have a real wall between your "business" (trading) and your personal investments.
Hope this helps.
Ken
From: OptionClub@yahoogro
Sent: Tuesday, February 02, 2010 11:31 PM
To: OptionClub@yahoogro
Subject: Re: [TheOptionClub.
It applies to all filers claiming capital gains. It's easy to do and well worth the little extra effort.
From: Jeannie <texasgig@gmail.
To: OptionClub@yahoogro
Sent: Tue, February 2, 2010 8:32:43 PM
Subject: Re: [TheOptionClub.
Hi,
Thanks for the info. Does this apply to all tax filers, or only those under trader status?
Does anyone have thoughts on switching to trader status, by the way (pros/cons)? I'd guess that mark-to-market reduces hassle of record-keeping, and one also gets to write-off expenses, correct? But are there drawbacks?
I'm wondering how to establish trader status -- whether there are certain trade activity minimums, and whether it requires an accountant or lawyer initially, and how much that would cost.
Thanks!
On Mon, Feb 1, 2010 at 7:06 PM, nahorowitz <nhorowitz@axeus. com> wrote:
Some clarification on 1256 tax treatment. There are some grey areas in the law regarding 1256 treatment. For those of you who don't know about 1256, it is IRS rule that gives 60% long term/40% short term tax treatment to broad-based index options, so this is a big tax-saver for folks who collect premium and would otherwise be taxed 100% short term rate.
All broad-based cash settled index options for sure get 1256 tax treatment. So this includes all index options, as well as any other obscure cash settled options. They must meet the definition of "Broad-based" which basically means 10 or more constituents. Narrow-based indexes (9 constituents or less) do not qualify.
Now the grey area in the law has to do with options on ETFs that mirror broad-based indexes. So does SPY qualify for 1256 treatment? Several of the CPAs who are expert in trader taxation (e.g., Robert Green of GreenTraderTax. com) take the position that options on broad-based index ETFs DO qualify for 1256 treatment. But there is no law or IRS ruling or case law directly on this point, but there are some strong arguments in favor of this position.
One of the tax matching software programs called GainsKeeper keeps an up-to-date list of ETFs that they believe qualify for 1256 treatment of their options. I know that SPY and UNG are on their list. The product manager told me that the IRS uses Gainskeeper on their side, so if your ETF symbol is on Gainskeeper'
Now that ThinkOrSwim has merged with Ameritrade and Ameritrade was a Gainskeep client, TOS now offers Gainskeeper Gain/Loss reports on the TOS website. Several other brokers also offer Gainskeeper reports for free. If the GainsKeeper reports says "Mixed" in the holding period column, then those are the symbols that they say qualify for 1256 treatment. I know SPY and UNG, which are both broad based index ETFs, have my options trades showing "mixed" on my Gainskeeper report.
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OptionClub-unsubscribe@yahoogroups.com
[TheOptionClub.com] Re: Has anyone tried this for TOS Commissions?
I am not familiar with the division between TOS' operations here in the
U.S. and there in Canada. Once TD Ameritrade bought TOS, I, along with
a lot of other TOS clients, had concerns about what this meant in terms
of commission structure, the trading platform, and other services.
Ironically, I was a TD Waterhouse customer but left because they did not
understand options and were not interested in supporting them at the
retail level beyond allowing me to sell covered calls or buy married
puts.
Are you sure the minimum is per leg? The minimum should be for the
whole ticket. I would double check that with them. As a practical
matter, at $1.50 per contract the cost of putting on one iron condor is
$6.00. If TOS Canada is willing to drop their minimum to $5.00 on the
whole ticket you can get into the position at no additional cost. Even
defensive tactics like a butterfly roll will cost more than $5.00 to
execute.
Christopher Smith
TheOptionClub.
--- In OptionClub@yahoogro
wrote:
>
>
>
> Hey Guys,
>
> I live in Canada and TOS is owned by TD Waterhouse here which is a
separate division of TD Ameritrade from the USA. I asked if they will
wave the the $7.50 minimum charge per leg. Since I am still learning the
ropes I only trade 1 contract per leg and I primarily do Iron condors. I
am ok with the $1.50 per contract charge but they refused to wave the
$7.50 minniumum. The best they offered was $5 minimum per leg which
still adds up to a lot of money when you trade only 1 contract per leg
on an iron condor.
>
> Is anyone here from Canada that has had better success then I did with
TOS? Also, do any of you guys have pull with the heads up at TOS where
we might be able to get them to bend the min. charge rules for their
Canadian subsidiary?
>
> Any help would be greatly appreciated. Thanks.
>
> --- In OptionClub@yahoogro
> >
> > Mike,
> >
> > Basically what happens when you're assigned on a cash index option
is
> > that for every point it is in-the-money $100 is deducted from your
> > account. So, if you have a 10 point spread the worse case scenario
is a
> > $1,000 deduction per spread sold. It's really not that big of a
deal so
> > long as you are managing your risk and not trading to much size.
The
> > cash deduction is no different that the account debit you experience
> > when closing the position.
> >
> > Most of the cash index options are European style, meaning that they
> > cannot be exercised early but there are some that are American style
and
> > that offer early exercise potential. For details on the specific
> > options you're trading head on over the the CBOE website.
> >
> > Christopher Smith
> > TheOptionClub.
> >
> > --- In OptionClub@yahoogro
> > wrote:
> > >
> > > Thanks Chris,
> > >
> > > These are index options. I learn by doing, so I trade live, just
very
> > tiny position sizes, so that I can understand what is happening in
the
> > live market. I had no plan for getting assigned on the short
options, I
> > only had plan to manage the portfolio by keeping delta neutral,
which
> > has indeed happened so far.
> > >
> > > Mike
> > > P.S. I just trade with TOS regular commission schedule, for the
reason
> > mentioned below.
> > >
> > >
> >
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
[TheOptionClub.com] Re: Has anyone tried this for TOS Commissions?
Hey Guys,
I live in Canada and TOS is owned by TD Waterhouse here which is a separate division of TD Ameritrade from the USA. I asked if they will wave the the $7.50 minimum charge per leg. Since I am still learning the ropes I only trade 1 contract per leg and I primarily do Iron condors. I am ok with the $1.50 per contract charge but they refused to wave the $7.50 minniumum. The best they offered was $5 minimum per leg which still adds up to a lot of money when you trade only 1 contract per leg on an iron condor.
Is anyone here from Canada that has had better success then I did with TOS? Also, do any of you guys have pull with the heads up at TOS where we might be able to get them to bend the min. charge rules for their Canadian subsidiary?
Any help would be greatly appreciated. Thanks.
--- In OptionClub@yahoogro
>
> Mike,
>
> Basically what happens when you're assigned on a cash index option is
> that for every point it is in-the-money $100 is deducted from your
> account. So, if you have a 10 point spread the worse case scenario is a
> $1,000 deduction per spread sold. It's really not that big of a deal so
> long as you are managing your risk and not trading to much size. The
> cash deduction is no different that the account debit you experience
> when closing the position.
>
> Most of the cash index options are European style, meaning that they
> cannot be exercised early but there are some that are American style and
> that offer early exercise potential. For details on the specific
> options you're trading head on over the the CBOE website.
>
> Christopher Smith
> TheOptionClub.
>
> --- In OptionClub@yahoogro
> wrote:
> >
> > Thanks Chris,
> >
> > These are index options. I learn by doing, so I trade live, just very
> tiny position sizes, so that I can understand what is happening in the
> live market. I had no plan for getting assigned on the short options, I
> only had plan to manage the portfolio by keeping delta neutral, which
> has indeed happened so far.
> >
> > Mike
> > P.S. I just trade with TOS regular commission schedule, for the reason
> mentioned below.
> >
> >
>
To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
Tuesday, February 2, 2010
Re: [TheOptionClub.com] Some clarification on 1256 tax treatment
From: Jeannie <texasgig@gmail.
To: OptionClub@yahoogro
Sent: Tue, February 2, 2010 8:32:43 PM
Subject: Re: [TheOptionClub.
Hi,
Thanks for the info. Does this apply to all tax filers, or only those under trader status?
Does anyone have thoughts on switching to trader status, by the way (pros/cons)? I'd guess that mark-to-market reduces hassle of record-keeping, and one also gets to write-off expenses, correct? But are there drawbacks?
I'm wondering how to establish trader status -- whether there are certain trade activity minimums, and whether it requires an accountant or lawyer initially, and how much that would cost.
Thanks!
Some clarification on 1256 tax treatment. There are some grey areas in the law regarding 1256 treatment. For those of you who don't know about 1256, it is IRS rule that gives 60% long term/40% short term tax treatment to broad-based index options, so this is a big tax-saver for folks who collect premium and would otherwise be taxed 100% short term rate.
All broad-based cash settled index options for sure get 1256 tax treatment. So this includes all index options, as well as any other obscure cash settled options. They must meet the definition of "Broad-based" which basically means 10 or more constituents. Narrow-based indexes (9 constituents or less) do not qualify.
Now the grey area in the law has to do with options on ETFs that mirror broad-based indexes. So does SPY qualify for 1256 treatment? Several of the CPAs who are expert in trader taxation (e.g., Robert Green of GreenTraderTax. com) take the position that options on broad-based index ETFs DO qualify for 1256 treatment. But there is no law or IRS ruling or case law directly on this point, but there are some strong arguments in favor of this position.
One of the tax matching software programs called GainsKeeper keeps an up-to-date list of ETFs that they believe qualify for 1256 treatment of their options. I know that SPY and UNG are on their list. The product manager told me that the IRS uses Gainskeeper on their side, so if your ETF symbol is on Gainskeeper's list you may be quite safe since the IRS will be checking that same list on their side.
Now that ThinkOrSwim has merged with Ameritrade and Ameritrade was a Gainskeep client, TOS now offers Gainskeeper Gain/Loss reports on the TOS website. Several other brokers also offer Gainskeeper reports for free. If the GainsKeeper reports says "Mixed" in the holding period column, then those are the symbols that they say qualify for 1256 treatment. I know SPY and UNG, which are both broad based index ETFs, have my options trades showing "mixed" on my Gainskeeper report.
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OptionClub-unsubscribe@yahoogroups.com
