Wash Sale Rule and Options

What this video covers

• Why the wash sale window is exactly 61 days, not 30 days, and how to count 30 days before, the day of, and 30 days after
• What happens when a loss is disallowed: the loss is deferred into the replacement security's cost basis and the holding period tacks on
• Why a call option is considered substantially identical to its underlying stock, and how buying a call within the 61-day window triggers a wash sale
• How a deep-in-the-money call or a deep-in-the-money put written on the same stock also acts as a substantially identical security
• When the wash sale rule does NOT apply: waiting beyond 30 days after the sale, selling at a gain, or buying stock in a different company
• Why broad-based index options, foreign currency options, and yield-based options are generally exempt from wash sale rules due to 60/40 marked-to-market treatment
• How to distinguish equity options (subject to wash sales) from marked-to-market non-equity contracts (generally exempt) on exam day