Wash Sale Chain

[dillon_smith92]

Hello,

Please help me in putting together a potential chain of wash sales:

2 XYZ Option Contracts Sold (Expired) on 12/16/22 at the same time (worthless, so losses, but different loss amounts to to different acquired dates)

- 1 acquired on 8/19/22

- 1 acquired on 11/16/22

1 XYZ Option Contract Sold (Expired) on 12/23 (worthless, so losses)

- acquired on 12/05/22

1 XYZ Option Contract (not yet sold, still holding)

- acquired on 11/16/22

Assuming all option contacts are substantially identical, how do I complete this wash sale chain accurately?

The two contacts expired (treating as “sold”) at the same time, so cash they wash sale each other? Or do I take the earliest acquired date one since they sold at same time and no way which to know was first?

Then, to which option contract does the wash sale go to afterwards?

I am having difficulty following a sequence here or know what wash sale I have? 

I know exactly what a wash sale is and how it works, so that is not what I am asking? But rather, what chain is required to be followed with multiple lots and transactions?

Thanks in advance!

[AmyC]

1. The original purchase date is irrelevant. Only the purchases within 30 days on either side of the sale/expiration counts. So all of your basis will be absorbed into the one you are still holding from 11/16. It is within 30 days of Dec 5.

2. No. They are both wash sales since you keep buying more of the item. 

3. Purchase date will vanish like the wash sale. The date becomes the newest purchase in the chain, Dec 5.

3. The first paragraph gets absorbed by the second which is absorbed by the third. Use most recent date. Now, you have a purchase from 11/16 which is counted as 12/5 and the basis is all 3 expirations before it plus the basis of that transaction.

[dillon_smith92]

Amy,

Thank you for your quick response. Okay, please bare with me as I seek a little more clarity on your reply; I am still having difficulty putting the chain together.

I had 2 Option Contacts sold (expire) on 12/16, again, different dates acquired.

I only bought 1 Option Contract on 11/16.

Then, bought another 1 Option Contact on 12/5.

I want to understand the logical chain of how you are getting to where you are getting.

On the day the 2 options contact expire at that same time, does that simultaneously create a wash sale between those two, or not?

If not, since I sold two and only bought 1 on 11/16, does it only take 1/2 the wash sale, until I buy the second one on 12/5, then it takes the other 1/2?

Please just breakdown the chain in more detail, if you could. I assumed that the total wash would still be move to my current holding I own, but I need to know why? There should be a streamlined process to the follow the chain.

For example, I couldn't move to the 12/5 purchase, which expired on 12/23, then say, well 12/23 is not within 30 days before or after 11/16.

Thank you!

[dillon_smith92]

Further,

I am just trying to understand why the whole thing is wash sale and not just 1 of the contracts?

More of breakdown would be appreciated!

Dillon