Is a covered call tax treatment the same as a short sale?

September 15, 2006

Date:  Wed, 14 Jun 2006
From:  Walter

Is selling a covered call considered by the IRS to be a short sale?

Thank you
Walter

Answer

Date:  30 Jun 2006

Hello Walter,

No. A covered call is different from a short sale. A short sale is a fixed obligation to sell something that will be delivered in the future. A call is an option to sell, which may or not be exercised in the future, even if you possess the underlying asset to be sold in a covered call.

Good luck!


Mike Gray

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