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Call option on the stock

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Reference no: EM131105285

An investor buys a stock at the beginning of the year for $50. At the end of the year, the stock is trading for $40. The investor sells then stock, takes a tax write off of $10 per share, and immediately buys a call option on the stock. This investor:

  • has violated the wash sale rule
  • has written a covered call
  • will be assigned on the call option
  • will likely experience a margin call

 

Reference no: EM131105285

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