actively trading stocks and TLH

[jeromedawg]

Hey guys,

Was just curious if there are any strategies or issues with trading a stock and looking for tax-loss harvesting opportunities.

For instance, if I'm playing around with a tech stock that has been barreling downward (and I invested in it prior at a higher price but I want to keep investing in it at the lower price), is it a good idea to sell it all at the lower price and re-buy it? And if the price drops *again*, wash rinse and repeat?
And can this kind of trading be done multiple times in a day with stocks? Or is that considered "round-robin" ?

Crap, looks like it would be considered a wash-sale. If I already did something like this (e.g. a wash-sale) with my stocks, what recourse do I have? None or suck up the loss? Or just live with the fact that I can't file it as a loss and hope the stock rebounds, then sell it off later?

[Mother Fussbudget]

I'm not suggesting you try this, but it's something to think about...

If an investor is a stock he-or-she likes, and thinks that stock will be higher priced long-term, they *could* consider selling the STOCK, and investing in a different instrument based on that underlying stock - i.e. CALL options / CALL option LEAPS. 

If they sell the STOCK, and buy the LEAP on the same stock (example: sell NFLX @ $126, and buy NFLX Jan 2017 $125 CALL options/leaps), the stock sale / option purchase can not considered a "wash" transaction.  But this takes a bit more investing savvy than the average investor, and comes with it's own risks - such as:  a) the stock may not behave as expected long-term , b) it may behave as expected, but the TIME horizon is longer/shorter than expected, c) larger market factors *will* push the stockmarket up-or-down, and impact the price of the targeted investment.

Again... something to think about, not necessarily something to actually DO

[jeromedawg]

Hmmm, seems I can't claim and deduct the loss at least NOW but could potentially claim it later?

https://research.scottrade.com/knowledgecenter/Public/education/article?docId=8bff29354aa1489a8ddcd9b002e50656
http://www.fool.com/personal-finance/taxes/wash-sales-and-worthless-stock.aspx

[seattlecyclone]

Yes, if you have a wash sale you add the amount of your disallowed loss to your cost basis in the replacement shares so that you get credit for it eventually.

[jeromedawg]

Yes, if you have a wash sale you add the amount of your disallowed loss to your cost basis in the replacement shares so that you get credit for it eventually.

So it sounds like I shouldn't be too worried about it then. Thanks!

[seattlecyclone]

Yeah, wash sales aren't "bad" in that your loss is gone forever, but there's not much point to selling and re-buying your shares if you're going to have a wash sale. Might as well just buy and hold.

[jeromedawg]

Yeah, wash sales aren't "bad" in that your loss is gone forever, but there's not much point to selling and re-buying your shares if you're going to have a wash sale. Might as well just buy and hold.

yea... the particular stock i have i held shares in across 3-4 diff accts lol so i guess this is another way of consolidating haha... prob not the most tax efficient but ah well - lesson learned