Welcome to Twenty-First Securities' Interactive Call Options Assessment Tree. 

There are two sets of qualified covered call rules that should concern investors who sell call options on their stock: the straddle rules and the holding period rules.  The holding period rules (for the 20% dividend tax and aging stock to long-term) are more restrictive.

Most calls will not cause a straddle or stop the holding period on stocks if they meet two conditions:
     1.  Time until expiration: between 30 days and 33 months.
     2.  Minimum strike price: The strike price cannot offer "too much" protection.  And the definition of "too much" is somewhat complex. Therefore, any strike price greater than the minimum strike price will always qualify and our decision tree will derive the minimum strike price for you.

The decision tree that follows should help you determine if your call options pass whichever test you choose.  The articles discuss the rules and regulations in greater detail.

 
Proceed to the decision tree if you have read and understand our disclaimer.
   
Click here if you are a new user or wish to review our disclaimer.


Relevant Articles:

Tougher Rules For Hedging Dividends (2004)
















Minimum Strike Price: How Much Protection is Too Much?
















New Qualified Covered Call Rules Limit Flexibility - Treasury Regulations Defining QCCs (2002).







Note:
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".

 

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