In January of this year i bought "the nancy special" and got myself some $650 20 Dec NVDA calls for about $33 each. Needles to say, my gainz meter has been tingling and by gainz meter I mean my D.

    As good as all this sounds, I have never had such a successful play and its gotten to the point that I need to start thinking about the tax implication this will have for me next year. Im hoping to get some perspective on my current situation and also to ensure I do understand the tax implications properly. Any constructive comment is appreciated.

    Assumptions:

    1. No tax event occurs if I exercise the options at any moment in time.
    2. Capital Gainz tax goes from regular income to 15% if i hold for a year regardless of overall income.
    3. I will exercise if stock returns to $1000 regardless of when.
    4. I am soooo deep in the money that theta decay means very little at this point.

    4a. That will stop been true if NVDA decides to declare bankruptcy before end of the year, or China invades Taiwan or AMD comes out with a gigantic upgrade on their chips before 2025.

    1. No need to sell until at least the stock split in a couple of weeks.

    2. At this point even if NVDA stays flat from now until December my gainz will remain about the same.

    The facts:

    1. If i do sell not just exercise that income will be taxed at 32%~
    2. I bought these calls on margin i owe $20k on them
    3. I can pay off the margin over a 8 month period, not ideal but it may make sense
    4. I do believe NVDA is gonna stay strong for the foreseeable future, I am considering using my brokerage account as my retirement account at this point.

    What I really dont know:

    1. It seems that because of the income tax differential it may pay off to wait for at least one year to sell and use those proceeds to pay of the margin.
    2. The intrinsic value between now and Dec 20th is very small been so deep ITM. Waiting is better than 17% tax
    3. Would it be better to exercise (not sell) now and stop worrying about theta? if so then the question is more about selling stock not Options.
    4. As Don quiƱones says to closeted racists, What would you do?

    Got some exit strategy questions for yall : NVDA
    byu/principedepolanco inoptions



    Posted by principedepolanco

    4 Comments

    1. I really don’t know much about taxes, but you need to sell a box spread on SPX (www.boxtrades.com/SPX) to pay off your margin ASAP and get a much better interest rate.

    2. cookingmonster on

      Pretty sure options contracts are not the same as stocks so short vs long term holdings don’t apply. Close the contract whenever you want and set aside 40% just to be safe.

    3. arbitrageME on

      I would start selling calls on them in the same expiration as your longs. If they breach, great — you collect the full spread. If they don’t, great — you protect your existing positions and collect on the upside theta

    4. Such a coherent post but you use “gainz”. Is English not your first language? If not then my apologies but the word is “gains”.

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