LaughingGas

Thank you. Looks like you are right, the tax loss is not lost forever. it is "deferred". Was worried about it all of yesterday, am a total newbie at this. Here is the explanation from HRBLOCK and another website https://www.hrblock.com/tax-center/income/investments/wash-sales/ You’ll need to figure the basis for shares sold in a wash sale. When you do, add the amount of disallowed loss to the basis of the shares that caused the wash sale. These are the new shares you received. By doing this, you defer the loss, but it’s not disallowed for good. You’ll get the benefit of the loss when you eventually sell the new shares (unless it’s another wash sale!). https://www.thebalance.com/wash-sale-rule-3192972 The tax benefit of your capital loss isn't gone forever, but it's deferred. The loss on the original investment will be taken into account when you sell your replacement shares by applying the losses to your adjusted cost basis.

@Kim @Yowster can either of you clarify the wash rule for me please ? in my fidelity account, i had about 20 thousand disallowed as wash sales, since i rolled over and bought the same option and sold it again. is the rule that the loss on the prior sales, will be added to the basis of your new purchase and then when you sell it, you will get a final loss number , or is it that you completely lose the loss on the first loss for tax purposes, as long as these transactions are not pending at the end of the year ? in effect scenario 1-- if the first sale loss is added to the basis of the second transaction, you lose nothing as long as you stop trading that security, and the effect vanishes 30 days after the last transaction with that CUSIP security ? scenario 2-- the first sale loss is denied completely, then you have lost a ton of tax capital losses that you could otherwise claim on your tax returns which one is correct ?

Excellent article from one of the law websites on the active trader exemption issues https://andersonadvisors.com/trader_taxation/

If you select the active trader status, I think the 30 day wash rule may not apply to active traders. That is why turbotax may not consider any of those as "wash sales". From what I am reading, @rasar comments also about IRA transactions can be regarded as being "similar" can be used for wash rules . You have to however meet the IRS requirement for active traders, which are not well defined either, as to who qualifies. I am not a tax expert, just a newbie trying to understand the IRS rules. I am sorry I put this question/conversation in this trade, I agree with the person above that this should be in a tax related thread. maybe @Kim or @Yowstercan help move this to the right thread.

Thanks. Very informative website. The 30 day wash rule as it applies to rolling losses on butterflies or iron condors , looks like it can be very tricky when rolling options. I wonder if some of the more experienced traders have any tips or experiences regarding this. I found another website with examples of what is substantially identical securities https://www.optionstaxguy.com/substantially-identical

Doe anybody know the IRS guidance on losses on rollover when we use an iron condor or a butterfly strategy ? can they deny the losses incurred for taxation under the 30 day wash rule for securities and still tax the profits occurred as part of that strategy ?

what is the tax adjusted returns for this strategy ? i am in a high tax bracket, with the frequent trades and not being able to compound my earnings, due to tax payments, how much ahead of the index will I be ? do you have any projections from your prior performance how this would perform against a buy and hold approach after factor in the capital gains tax savings and effects of compounding?