Covered Calls-Writing Covered Calls

Mark S asked:


I’d like to sell four-to-six month Far-OTM covered calls on ~50 stocks; I’d also sell new 4-6 month calls whenever the prior calls expire. I’ll have to make about 5-7 c.call transactions per month.

Since I have a full-time job, are there any tax issues I should be worried about? Can this volume of covered call option sales (upto about 60 sales orders per year for total 100-150 contracts) make me at risk of becoming an “active” trader and having the premiums taxed as income instead of capital gains? And if the premiums do get taxed as income, could that then cause any sales of the underlying equities to be taxed as income as well, or would I be able to maintain capital gains treatment on the underlying stocks?

Each year I make about 40-50 stock buy orders about perhaps about 20 sell orders so I’m probably doing about a 30% yearly asset turnover. The options proceeds would probably be under $12k per year in a $250k portfolio.

Edelmira Jeanbaptiste

rhegaana asked:


“The short option value is the total value of your individual short option positions based on the ask price”
Also why is it being subtracted from my total balance if I sold covered calls. As you can tell Im a beginner!!!!
Thanks for replies! So if the options expire worthless or I get called, the debit balance will return to my account.

Alvin Glanton