Taxes and Entity?

[Drew 0]

Hello all,

        I'm new to this forum after discovering you all from my friend Ophir over at CML and have been scanning the forums to an answer for a question I've been asking myself for a while now. With this much information in a forum I'm sure it has been asked before so maybe someone can point me in the direction to it? Hoping someone here can help.

I've been selling puts as more of an investment strategy in my Roth IRA for a few years now, out of the money, in the money, at the money all over the place depending on what I like.. but I always do it in names that I want to own moving forward. So basically, I am planning on getting assigned with most of these positions. Now that I have more money in my account I'd like to try this out in the taxable world and have a couple questions. 

First off, I've read that sold cash secured puts that expire after holding for >365 days get taxed at long term capital gains, but I've also heard that it doesn't matter how long you hold cash secured sold puts they all get taxed at short term capital gains.. can someone answer this for me? 

Second, I'm just now beginning to see the power in having some sort of entity started for a small business in the form of write offs, deductions etc. I started an S-corp last year with intentions on purchasing some rentals once I had the cash. Now that I have the cash, I'm leaning more and more toward trying to do something trading/investing wise. Is this even possible??? I've always looked at selling cash secured puts from more of an insurance perspective, meaning I'll take your risk to insure you on a big downturn. The thought of using time decay and reaching a daily premium amount for passive income is interesting to me. Could this qualify as a business in an S-corp or any other entities? I don't generally trade per-se so I don't know if trader status would help me.. I generally just sell cash secured puts usually around 365 days out in companies that I like that generally have fairly high implied volatility to get the lowest cost basis I can if I get assigned (but if its all taxed as short term capital gains maybe I will trade more often when I see an opportunity). Anyways I was hoping someone could point me toward whether or not its possible to form a legal entity that would allow me some deductions or any tax breaks.Also would forming some sort of a fund be something to look into (is this even possible?)

 I'm sure the questions have been asked here before. I'm not a CPA obviously but the few that I have talked with don't seem to grasp the nature of selling options from a tax perspective so it makes me uncomfortable. If anyone here knows a CPA confident in their abilities here that they could put me in touch with I'd gladly pay for their services.

Thanks everyone, I'm looking forward to learning more here with this Steady options community!

[mav77 0]

On 4/9/2020 at 9:40 AM, Drew said:

Hello all,

        I'm new to this forum after discovering you all from my friend Ophir over at CML and have been scanning the forums to an answer for a question I've been asking myself for a while now. With this much information in a forum I'm sure it has been asked before so maybe someone can point me in the direction to it? Hoping someone here can help.

I've been selling puts as more of an investment strategy in my Roth IRA for a few years now, out of the money, in the money, at the money all over the place depending on what I like.. but I always do it in names that I want to own moving forward. So basically, I am planning on getting assigned with most of these positions. Now that I have more money in my account I'd like to try this out in the taxable world and have a couple questions. 

First off, I've read that sold cash secured puts that expire after holding for >365 days get taxed at long term capital gains, but I've also heard that it doesn't matter how long you hold cash secured sold puts they all get taxed at short term capital gains.. can someone answer this for me? 

Second, I'm just now beginning to see the power in having some sort of entity started for a small business in the form of write offs, deductions etc. I started an S-corp last year with intentions on purchasing some rentals once I had the cash. Now that I have the cash, I'm leaning more and more toward trying to do something trading/investing wise. Is this even possible??? I've always looked at selling cash secured puts from more of an insurance perspective, meaning I'll take your risk to insure you on a big downturn. The thought of using time decay and reaching a daily premium amount for passive income is interesting to me. Could this qualify as a business in an S-corp or any other entities? I don't generally trade per-se so I don't know if trader status would help me.. I generally just sell cash secured puts usually around 365 days out in companies that I like that generally have fairly high implied volatility to get the lowest cost basis I can if I get assigned (but if its all taxed as short term capital gains maybe I will trade more often when I see an opportunity). Anyways I was hoping someone could point me toward whether or not its possible to form a legal entity that would allow me some deductions or any tax breaks.Also would forming some sort of a fund be something to look into (is this even possible?)

 I'm sure the questions have been asked here before. I'm not a CPA obviously but the few that I have talked with don't seem to grasp the nature of selling options from a tax perspective so it makes me uncomfortable. If anyone here knows a CPA confident in their abilities here that they could put me in touch with I'd gladly pay for their services.

Thanks everyone, I'm looking forward to learning more here with this Steady options community!

Great question

 

My question is scale and your time reward for SO trades.

 

Let's say you have $10,000 and your return is 60% everything goes well after, you pay steady options subscription fee and then maybe ONE software service and consider you're operating outside of a retirement account -taxes are what 25% minimum? 

I read on forums this isn't scalable because of liquidity, is this hobby trading or trading for a living is what I'm trying to figure out?

Thank you

[Kim 7,437]

37 minutes ago, mav77 said:

Great question, I would think it's a professional question greentradertax.com

No affiliation with them or haven't used them but learned of them through elite trader.com

 

My question is scale and your time reward for SO trades.

 

Let's say you have $10,000 and your return is 60% everything goes well after, you pay steady options subscription fee and then maybe ONE software service and consider you're operating outside of a retirement account -taxes are what 25% minimum? 

I read on forums this isn't scalable because of liquidity, is this hobby trading or trading for a living is what I'm trying to figure out?

Thank you

The strategies are scalable up to $100k. If you make even "only" 30%, that's $30k. Pretty good ROI on your subscription fee I would say.

Do you know any (legal) business or income outside of a retirement account that you don't need to pay taxes on?

[mav77 0]

8 hours ago, Kim said:

The strategies are scalable up to $100k. If you make even "only" 30%, that's $30k. Pretty good ROI on your subscription fee I would say.

Do you know any (legal) business or income outside of a retirement account that you don't need to pay taxes on?

Oh no absolutely not! You're right about that.

I'm just not sure with my time what this is going to take. I'm still evaluating   also figure out a Roth IRA Exactly how I could set up that and trade SO in it.. right now I just think the subscription service for $10,000 account is really high

Wouldwould really like to know in real-world how many people achieve the performance results

[Kim 7,437]

Regarding the rates, we are very competitive in the market place and provide a substantial value over other services unless your sole purpose is to purchase the lowest price product possible. We recognize that is the goal of some traders, however, many traders appreciate the value we provide in terms of performance, community, education etc.

We encourage everyone to do their due diligence and compare us to other services. Many members tell us that we could charge double and still be the biggest bargain in the industry. We believe in work and long term commitment, not in "get rich fast" schemes. Like any professional education program, our programs require work and discipline. We are only interested in serious traders dedicated to their professional development. If after browsing our website you believe that $4/day for a service like SteadyOptions is "really high", then you probably shouldn't subscribe. 

[SureTrader 40]

2 hours ago, mav77 said:

Wouldwould really like to know in real-world how many people achieve the performance results

I have been with SO for only 3 mo now and am 90% close to their results. You have to know how not to try ditto them. Ditto should not be the goal. I am here for ideas only. Execution (entry and exit) is upto me. I some times get better fill and some times not. The goal should not be to beat SO performance. 

I often make changes to the original idea. 

[Sylva 1]

5 hours ago, mav77 said:

Oh no absolutely not! You're right about that.

I'm just not sure with my time what this is going to take. I'm still evaluating   also figure out a Roth IRA Exactly how I could set up that and trade SO in it.. right now I just think the subscription service for $10,000 account is really high

Wouldwould really like to know in real-world how many people achieve the performance results

Hi Mav,

I've been here for about 2 months and I've been trading in my Roth with Level 2 options approval (Schwab) so I can execute the trades discussed here.  Though I've been trading options for over 10 years, they've primarily been vertical spreads and diagonals.  The core strategies used here (Hedged Straddle / Strangle) and the Calendar, are newer to me and it does take some studying.  Try the trades, try to understand how they were identified, entered, managed and exited, not just rely on the email alerts. 

I can tell you that I've already recouped my investment for the annual subscription, but I've also done my own trades along side the ones discussed here.  I consider the subscription fee my tuition to learning a few new strategies.  Losing money on poor trades or poorly managed trades can also be considered 'tuition.'  Paying the subscription fee here is a financial outlay I can control and I get my value in return.  Trading options without a solid understanding of sizing, risk management, exit, etc., can be a far more expensive "tuition".

Either way, it's a great community here and with a bit of effort, one can definitely learn a lot, regardless of their experience.  

[Kim 7,437]

You might want to read the Best Practices/Tools topic.

As I mentioned there:

In my opinion looking at SO subscription cost (or the cost of any tool or course) as percentage of your account is a mistake. You invest in your trading education. You invest in your future. You expect that what you learn will help you to improve your trading and your profitability going forward. In the same way as people who pay $5-10k for educational course don't expect an immediate return on their investment. Or people who pay tens of thousands per year for college education are fully aware that they are investing in their future.

[Drew 0]

On 4/18/2020 at 10:44 PM, Kim said:

The strategies are scalable up to $100k. If you make even "only" 30%, that's $30k. Pretty good ROI on your subscription fee I would say.

Do you know any (legal) business or income outside of a retirement account that you don't need to pay taxes on?

Thanks for your help Ken, I'll check out their page.

[Drew 0]

Kim, sorry.