Capital Gains Taxes on Stock Option Index Trades

Short-term gains from most types of stock and option investing are taxed at the same rate as ordinary income. Long-term gains on stock and option investments held for more than 12 months are considered long-term and taxed at 15% in most cases. If your tax bracket is below 25% then long term gains are taxed only 5%. The good news is that the gains from the stock index options trades we are trading are taxed differently than gains on individual stock options and stocks. Gains on our stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%. Please do not take this information as tax advise. Do your own research with a tax advisor like H&R Block.

New Bull Put Trades expiring in March Posted to Members Page

The market rose again in February and our second Bull Put trades of 2011 expired worthless. The markets are rising now because 1st quarter earnings are exceeding expectations. These positive earnings are bringing investors back into the market causing stock prices to rise. We must continue to trade on the PUT side while this bull market continues.

New Bull Put Trades expiring in February Posted to Members Page

The market rose again in January and our first Bull Put trades of 2011 expired worthless. There is no indication that the markets will not continue to rise in February so we are going to be conservative again and trade another Bull Put spread.

New Bull Put Trades Expiring in Jan 2011 posted to the Members Page

The market is rising again so the call side is too risky. We would have had to close out Bear Call trades a lot these past 4 months if Iron Condor trades were completed. The Bull Put trades are providing a decent monthly return so I am going to start off 2011 is another conservative Bull Put Trade. In 2010 these Bull Put trades generated a 33% annual return. My goal is to repeat this performance in 2011.

New Bull Put Trades Expiring in December 2010 posted to the Members Page

The market is still volatile dropping and rising on international news events. One new stock offering also allowed the markets to recover nicely last week. This time of the year is always fun to trade credit spread Put options because the markets rise in December. So I am continuing the trend with a new RUT Bull Put trade to finish the year.

New Bull Put Trades Expiring in November 2010 posted to the Members Page

The market continues to rise month after month. Our RUT Bull Put trades have now expired worthless 5 months in a row. If we have completed Iron Condor trades our Bear Call trades would have been at risk and closed out early for a loss. By trading just one side we are still averaging a decent monthly return. When most CDs and fixed investments are earning just 3%-5% for a year we are earning 5% to 8% monthly. This translates to a very high annual return.

New BUll Put Trade Shoud Expire this Month

9/7/2010 The markets continue to rise which makes our open trade less risky. With only 10 days left it is now very likely that our RUT and IWM RUT Bull Put trades will expire worthless.