If you are selling a stock/mutual fund/bond at a loss one can't buy same security within 61 days (30 before and 30 after of trade date). It is due to WASH rules. That is clear.
- You stated that perfectly.
What is similar rule? I assume if you sold VFINX (vanguard S&P500 Index fund) at loss and bought SPY or any other S&P500 Index fund they will be consider similar. What are other criteria of similar? If I sold Ford Motor at a loss and bought GM within 61-day window does WASH rule apply?
- This is not as clear cut.
- If an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they can immediately turn around and purchase the Vanguard S&P 500 ETF.
- The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology, and may have different levels of liquidity in the market. Presently, the IRS does not deem this type of transaction as involving substantially identical securities and so it is allowed, although this may be subject to change in the future as the practice becomes more widespread.1
Now real question What are WASH rules for Options?
Option they are chains for same underlying security and expiration are weekly or month so more. Each and every Option can make or lose money. They are same underlying. Let's say Ford is trading $10 so $11 or $122 Calls are similar or maybe not.
- If the underlying stock is the same: if you sell stock at a loss, it is a wash sale by trading in options in the same stock. Secondly, losses from the options themselves can be wash sales.
Publication 550 Investment Income and Expenses
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