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?

    In a bull put spread, the options trader writes a put on a security to collect premium income and perhaps buy the security at a bargain price.
  2. Trading

    Creative Ways to Protect Your Stock Portfolio

    Protecting your stock portfolio is an extremely important part of portfolio management.
  3. Trading

    More Tips For Series 7 Options Questions

    Here are more tips to ace the Series 7 questions on options contracts and stock positions.
  4. 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.
  5. Trading

    Bear Put Spreads: An Alternative to Short Selling

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

    Risk Reversals for Stocks Using Calls and Puts

    Risk reversal strategies can be a very useful “option” for experienced investors who are familiar with basic puts and calls.
Trading Center