An investor who has purchased a protective put on a stock held less than 12 months will cap the holding period for that stock at 12 months and will have a short term gain or loss on the sale of the stock. If the stock was held for more than 12 months before purchasing the put, any gain or loss will be long term. Married puts purchased on the same day as the stock will not automatically create a short-term gain or loss for the stock so long as the puts are identified as a hedge or as married puts when the order is executed. If the put expires, the put’s premium is added to the stock’s cost base.

Need Help Passing Your Series 4 Exam?

Covered Calls

Related Articles
  1. Trading

    What Is A Bull Put Spread?

    Investopedia explains: A bull put spread is a variation of the popular put writing strategy, in which an options investor writes a put on a stock to collect premium income and perhaps buy the ...
  2. Trading

    Solving Mixed Options Problems On The Series 7

    Learn to ace the questions that involve both options contracts and stock positions.
  3. Trading

    Profiting From Stock Declines: Bear Put Spread Vs. Long Put

    If you're bearish, you should compare the risk/reward characteristics of these two strategies.
  4. Trading

    Bear Put Spreads: A Roaring Alternative To Short Selling

    This strategy allows you to stop chasing losses when you're feeling bearish.
  5. Trading

    Introduction To Put Writing

    Learn about a strategy that may be appropriate if you have a positive outlook on a stock.
  6. Investing

    Long on Oil? Hedge Falling Oil Prices with Options

    With no end to the oil slump in sight, here are some risk management strategies using options to protect your oil positions.
  7. Investing

    How to Prevent Your Stock Gains From Vanishing

    Investors are sitting on mountains of unrealized gains that may disappear in a selloff.
  8. Managing Wealth

    Don't Forget Your Protective Collar

    Guard your finances in uncertain times with a protective collar strategy, which provides short-term downside protection.
  9. Taxes

    Capital Losses and Tax

    Capital losses are never fun to incur, but they can reduce your taxable income. Knowing the rules for capital losses can help you maximize your deductions and make better choices about when to ...
Frequently Asked Questions
  1. Why do futures' prices converge upon spot prices during the delivery month?

    Learn why as the delivery month of a futures contract approaches, the future's price will generally inch toward or even come ...
  2. What's the difference between moving average, weighted moving average and exponential moving average?

    Moving averages are one of the most popular tools used by active traders to measure momentum. In this FAQ, we'll take a look ...
  3. What is the difference between fundamental and technical analysis?

    Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at ...
  4. Are high-yield bonds better investments than low-yield bonds?

    It depends on the amount of default risk you as an investor want to be exposed to. More yield goes hand-in-hand with more ...
Trading Center