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Sam Benen

Personal Finance, Retirement, Investing
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“With a decade of experience in the financial world, Sam Benen is committed to being a helpful resource for a wide range of personal financial decisions.”
Firm:

SJBenen Advisory, LLC

Job Title:

Investment Adviser

Biography:

Sam has been in the investing business since graduating from Princeton in 2007 with a Bachelor’s degree in economics.  His career as a trader and portfolio manager in the hedge fund industry, with experience trading a wide range of financial instruments and overseeing complex portfolio strategies, gives him a unique perspective on being an investment adviser.  He started SJBenen Advisory, LLC in 2016 with the simple idea to use his accumulated investing experience to help people.

Sam was a top-ranked chess player in the nation growing up, winning 7 individual national chess championships between the ages of 8 and 18.  He is an ever-aspiring student of all kinds of strategic games like Scrabble, Boggle, gin rummy, poker, and golf.  He is originally from New York City and now lives in Chapel Hill, North Carolina.

Education:

BA, Economics, Princeton University

Assets Under Management:

$58 million

CRD Number:

6634000

Disclaimer:

SJBENEN ADVISORY, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN

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May 2017

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    Stocks
How is a stock's cost basis determined if you own a stock and later trade it by buying long or selling short or by using put or call options?
100% of people found this answer helpful

Trading options against an existing stock position will not alter your cost basis on the stock.  The tax rules on this are specific and complicated.  To find out the rules for your exact situation, you need to read Publication 550 on the IRS website in detail.  Here is a brief overview I can offer you with two straightforward examples if you bought 100 shares of XYZ a few months ago at $50 per share and your cost basis is $5,000.

1. If you decide to enter into a covered call position by selling one 60-strike call option on XYZ for $5, you receive $500 in cash up front from the call option sale.  These are the resulting scenarios:

a) The stock is under $60 at expiration and the call option expires out-of-the-money.  This creates a short-term capital gain of $500 on the option expiring at zero.

b) The stock is over $60 at expiration and your 100 shares are assigned away at $60 per share.  Your proceeds for tax purposes will be the $60 per share from the assignment plus the $5 in option premium you collected up front.  You will have a realized capital gain on the stock of $1,500 per share ($6,500 proceeds minus $5,000 cost).

c) Before expiration, you trade out of the option position.  If you buy to cover at a price higher than your cost basis of $5 per contract, you take a short-term capital loss; if you buy to cover below your cost basis of $5 per contract, you take a short-term capital gain.

2. Now consider that instead of selling one 60-strike call option, you buy one 40-strike put option for $5.  You lay out $500 in cash up front for the purchase.  Here are the scenarios:

a) The stock is over $40 at expiration, in which case you lose your $500.  This is a realized short-term capital loss.

b) The stock is under $40 at expiration.  You exercise your put option triggering a sale of stock at $40 per share.  For tax purposes, your proceeds on the sale will be the $40 exercise price minus the $5 you initially laid out.  You will have a realized capital loss on the stock of $1,500 ($3,500 proceeds minus $5,000 cost basis).

c) Before expiration, you trade out of the option position.  If you sell to close the option below your cost basis of $5, you will have a realized capital loss; if you sell to close above $5, you will have a realized capital gain.

Lastly, let me leave you with this:  I urge you not to speculate with options.  Options trading by individual, nonprofessional investors is a losing proposition because the world of options trading is dominated by the smartest sharks in the world.  Your odds of coming out a winner in the long haul are almost zero.

I hope this helps.

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What is the official transaction time of a stock or an option?
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    Financial Planning, Investing
Is it a good idea to get a whole life policy for a newborn child with a relatively small death benefit (instead of a 529 plan) just to put money into the cash value as a savings/investment vehicle?
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Do we have enough money saved as collateral against potential market downturns during retirement?
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Should I use my saved money to pay off my mortgage or invest?
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May 2018