2leg options and washsale

Forum|Forum|1 year ago
November 11, 2024
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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?

Not A Product Question

Anonymous_

Employee

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Mike9241

see this link to see if it helps.

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

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.

RayZ2Author

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?