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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 15% 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.
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.
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Proceed to the decision
tree if
you have read
and understand our disclaimer. |
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Click here if you are a new user or wish to review
our disclaimer. |
Relevant Articles:
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Tougher
Rules For Hedging Dividends (2004) |
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Minimum
Strike Price: How Much Protection is Too Much? |
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New Qualified Covered Call Rules Limit Flexibility -
Treasury Regulations Defining QCCs (2002). |
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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". |
