Chapter 25. An End-of-Year Tax Strategy

Suppose you own a stock that has made a nice gain during the year, but you are concerned about a substantial pullback near the end of the year. Of course, you are reluctant to sell your stock and take your profit before January 1, because of the tax implications. You would like to avoid having to pay tax on that nice profit when the next April 15 arrives.

The IRS regulations make it essentially impossible for you to install any kind of cost-free hedge of your stock profit that would defer a tax payment into the next year. There is, however, a way to use options to provide some degree of cost-free protection of your profit without creating a taxable transaction. This chapter demonstrates a strategy that ...

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