Are options and shares considered as substantially identical securities to the IRS when determining wash sales? For example, I just sold some HD call options for a loss. If I buy HD shares within the next 30 days, does that trigger a wash sale? Or would the wash sale only trigger if I bought HD call options?

More specifically, the wash-sale rule states that the tax loss will be disallowed if you buy the same security, a contract or option to buy the security, or a "substantially identical" security, within 30 days before or after the date you sold the loss-generating investment (it's a 61-day window).

https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax

I may be wrong, but I don't think that options are substantially identical to shares, at least they have never shown up that way on my tax documents that I get from brokers.

If you exercise the option and acquire shares, then your cost basis would probably be adjusted according to the wash sale rule though.

This post was edited by NetflixAdaptationWidow on Jun 10 2021 01:03pm

that 61 day window is another thing I dont get. So if I day trade the same stock over and over day after day, and one day I take a loss, do my previous buys and sells trigger the wash sale since they were in the 30 days previous to the day I sold for a loss?




I hope you are right because I want to keep trading HD instead of avoiding it for the next 30 days. I have been successfully day trading HD and LOW this week. I have tons of buys and sells. Today i had about 3 of each security. When holding some HD shares today, I sold some covered calls, then later when share prices went back up I saw that I could buy to close those covered calls at a loss and sell the shares and still net a profit. So that is what I did. Now If buy more HD shares tomorrow, and sell a covered call, will any wash sales be triggered?

heres some info on it - i dont really day trade (used to swing trade) so i dont know the specifics

https://www.dummies.com/personal-finance/investing/day-trading/understand-the-irs-wash-sale-rule-when-day-trading/