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2leg options and washsale

A 2-leg option (say a put spread) usually has a leg that wins and a leg that losses? How would washsale rule play for these contracts?

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5 Replies

2leg options and washsale

 

2leg options and washsale

see this link to see if it helps.

https://fastercapital.com/content/Options-Trading--Navigating-the-Wash-Sale-Rule-for-Derivative-Inve... 

Understanding the definition of substantially identical: The IRS defines substantially identical securities as those that are so similar that they are essentially the same security. For example, a call option on a particular stock would be considered substantially identical to another call option on the same stock, while a put option on the same stock would not. 

 

however, I have been unable to find an example published by the iRS.

2leg options and washsale

Thanks!

To clarify, the 2leg options usually end up with closing both legs at the same time. Say the trader 1st sells $H and buys $L at time 0, then later buys back $H and sells $L later, on most ovations one leg will be in loss and one is profit. Would the leg at loss be considered washsale, given both legs are traded at the same time?

2leg options and washsale

 

2leg options and washsale

Yes, seems like if the strike prices are different specially if expiration data is different there is no problem.

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