Cost Basis Reduction Explained | Options Trading Concepts

[@hansitburrun]

One of the best course on option bravo

[@MeDavidLi]

Great easy and clear concept to follow. Planning to get into option trading after I finish 33% of your contents:-) I appreciate your nice work!

[@oshanerichardson]

You give the best explanations! Great teacher.

[@suryakiranganti]

Brilliant explanation! I have been using covered calls all these days, the strangle is a new idea!

[@CoffeeRoamer]

This is great best explained.. only thing difficult is discipline to follow the plan and trade the plan

[@duke927]

Thanks for the video and good info:) I bought a stock for a quick dividend turnaround and sold some calls against the entire holding. and it dropped immediately. The calls didn’t give me much profit so I held on. The stock continued to drop. I got the generous dividend which gave me near a one dollar cushion. I kept rolling down the calls (weekly) taking a profit each time (usually 50% or more ) when the stock dropped. Lucky it wasn’t a bottom falling out drop probably due to the generous dividend. I bought back one set of weekly calls at a slight loss and continued to sell all the way back up. And I started selling some puts way down the scale for maybe 80-100 bucks profit a week. I’ve held the stock for about 4 months now and have received two dividends. I haven’t done a cost basis analysis but I figure even with the stocks still in slight loss territory I have made a profit. You have to be careful about selling calls around the record date though as it might become attractive to exercise and steal your dividend:)

[@loveormoney786]

Sustainable mindset is key with short calls and puts. You feel bummed with the stock rockets but in the long run this is the golden strategy.

[@mentemillonariatips]

Grande video, complimenti 🎊

[@dhavalgala5750]

you nailed it bud

[@thepepperking3075]

Are not the underlying and option taxed as their own entity? Essentially you pay capital gains tax on an option when it closes. If that is true, why would i include it in my cost basis of the underlying; to me this implies i would get taxed twice on the option when i sell the underlying for profit. I think Fidelity explained it to me that you can say”it effectively reduces your cost basis” but in the end, each is its own entity and as such gets taxed by its self”

[@suryakiranganti]

Quick question.. for stocks that do not have options and futures like mid caps and small cap stocks, how can we reduce the cost basis ?

[@investzaku]

great Job, Thanks

[@mosestighil1179]

incredible explanation

[@tastyliveshow]

Thank you! I appreciate your support!

[@filippooddi5480]

Mike, What does "allow myself to be put the stock" at min 7.15?

[@tastyliveshow]

If you sell a put and the put goes ITM and you hold through expiration, the short put will turn into 100 shares of long stock. This can be avoided by rolling or closing the position beforehand, assuming you were not assigned randomly.

[@plcmtny3971]

Is it possible to go below $0 on the cost basis?

[@tastyliveshow]

In theory, yes! In the case of buying 100 shares of stock for $10,000, if you eventually collect enough premium through a short call that is sold against the shares (covered call), you could own the shares for "free", if you collect more than $10,000 over time.

[@РусланДрачук-х7о]

good

[@kdb2003ify]

Can you explain how to avgerage down option

[@tastyliveshow]

In what sense?

[@dommafia]

@@tastyliveshow I think he's talking about buying the same long call option if the price lowers in order to reduce the contracts average cost.

[@nirmalsingh2396]

Hello,Mike pls suggest me a book for option.

[@tastyliveshow]

Check out our free beginner options course at tastytrade.thinkific.com

[@adfernand987654321es]

So basically you make money irrespective of market movement right?

[@tastyliveshow]

You can make money regardless of the stock movement in a trade that has a cost basis reducing component. If you freeze everything except time passing, the short option always expires worthless at the end of the day.

[@b.i.g.damian626]

hey Mike (not sure if you will still see this comment so many years into the future) but I do have a question. if you sell the $47 put for $1.00 credit, should you be assigned the shares, wouldn't you have income of $100 and cost basis of $4,700 (NOT $4,600 - meaning you cannot use the $100 to offset cost basis but must recgonize that income) and when you sell your shares eventually, your G/L would be based on $4,700 cost?

[@b.i.g.damian626]

i.e. the brokerage wouldn't adjust your cost basis for the stock because the profit on your options must be taxed immediately v. if you embed it into the stock cost basis, you would be able to hold the shares and defer tax indefnitely. hopefully I'm making sense!

[@tastyliveshow]

@@b.i.g.damian626 Correct your position would read +100 shares at $4700, but you would have "made" $100 in extrinsic value against the position. Your overall P/L if the stock were to go to $0 would be $4600. Or, if the stock went back to $47 your P/L would be +$100. Either way you collect $1.00 that reduces the basis on your shares by $1 per 100 shares.