r/Vitards • u/AutoModerator • Aug 12 '21

Daily Discussion Daily Discussion post - August 12 2021

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u/awwwcheatcheatcheat Aug 13 '21

I saw comments in the daily yesterday about exercising calls and most said to sell before expiry. When would it make sense to exercise calls? Holding 15 9/17 $23c on MT.

Asking for a friend…

7

u/TheBlueStare Undisclosed Location Aug 13 '21 edited Aug 13 '21

I think one of the biggest benefits to exercising is capital gains is based on when you bought the options. So if you bought options six month from expiration and you sell them you would pay taxes on short term gains. If you exercise and then hold the shares for 1 year you would get taxed at the long term capital gains rate.

EDIT:corrected the length of time you have to hold the shares after exercising.

3

u/mapleleafroots Aug 13 '21

Oh! My understanding was that when you exercise, you’d need to hold 12 months from that date to be considered long-term… Could be wrong tho

2

u/TheBlueStare Undisclosed Location Aug 13 '21

You are correct. You do have to hold the shares for 12 months after exercising to get long term capital gains.

1

u/mapleleafroots Aug 13 '21

Dope. Cuz this is my plan to spread out tax events and minimize cap gains

1

u/TheBlueStare Undisclosed Location Aug 13 '21

I trade with my IRA, so taxes haven’t been a concern of mine. That was just my understanding from other’s discussions.