Low-Cost-Basis Stock – An Overview
with low-cost-basis stock face many decisions. First, they
should determine the investment goals for their particular
security. When a stock achieves its investment expectations, it
is thought that the investor has to either sell the stock and
pay a capital gains tax or hold the stock and watch it rise or
fall. There are other choices available to take a few chips off
the table without triggering tax or giving up ownership.
attached articles and decision tree show, investors do have many
other choices. Specifically, they can create options-based
hedges on their stock and, if they wish, borrow against the (now
hedged) stock. There are different ways to hedge stock and
different ways to monetize. Low-cost stockholders need to learn
about the risks and rewards of each approach so that they can
choose strategies that are appropriate for their situations.
chosen a risk/reward profile, low-cost-basis stockholders need
to consider certain features of their particular securities and
how they were acquired. With so many factors and choices to
consider, investors with low-cost-basis securities can feel
attached Low-Cost-Basis Stock Decision Tree, we have
mapped out the most important investment factors and choices in
summary format. This interactive flow chart sets forth the
various low-cost stock management techniques and summarizes the
significant consequences that follow from each approach.
who prefer a textual summary, we have also attached a series of
short articles on hedging strategies.
We hope that
the program and articles will give investors an overview of their
alternatives for managing low-basis securities.
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Options involve risk and are not suitable for all
investors. Before engaging
in an options transaction, investors must receive the booklet “Characteristics
and Risks of Standardized Options.”