Stock options collar tax treatment
Hi all,
I bought AMD call options expiring March of 2027 next year a few months ago. Now AMD has ran quite a long and I want to lock in some gains but also leave some room on the upside, but don't want to sell to trigger short term capital tax. The incremental tax rate is 40% with federal, state and NIIT. So I thought of hedging by creating a collar so that I could continue to hold the option for more than 1 year. Here is my setup,
AMD 260 strike calls (this is the leaps I bought) ,
I want to buy 445 strike puts and sell 600 strike calls. AMD stock price is around 465 when I'm writing this post.
I have read that doing this "may" trigger some irs rules that either reset or pause the holding period for my LEAPS. I have been trying to research this for the past week. All the AI tools seem to give me not definitive answers. Does anyone know the answer to this? Thanks.
