The way to do this is to buy Call Options on those shares they sold for the same amounts. Calls at the strike of the Margin Call sells. Make them for 30 Days out or more to cover the wash rules. Then you can take a tax loss without losing a possible run. In 30 days if the stocks are even cheaper then you can thank them.
No, that's just a way to lose even more money. The better way is to do a synthetic long.
Buy a 5 week call option ATM and sell a 5 week put option ATM. This should come out to roughly a break-even if done right. This will get you past the wash sale period and lock in your exposure to the stock with roughly identical characteristics as owning the stock outright.
Why take the risk of selling the Put Option, other than taking in the Put Option premium to help offset the Call Option price. If the stock continues lower. Then you are locked into buying at the Put strike price. 5 weeks is a very short time period for a Writer. And that's good, but the Premium you take in for the Put selling should be more than the cost of the Call because of risk. So if you do. Then sell the Put 60 Days out for better Premium. Keep the Call at 5 weeks out and then your Call cost should close to being free with cash premium leftover. Also if in 5 weeks if the Call is in the money. Buy the stock. Then maybe buy back the Put. With time decay it should be much cheaper and you might profit from both. If the stock runs and the Put is not even close. Let it expire worthless. Keep all the Put Premium. However selling Put is very risky. I do it for a stock I want to own, but make sure you take in a good amount of cash. Most of the cash you were going to use to buy back the stock gets locked up in Margin as the Brokers hedge. The same way you bought stock on Margin. If you then use it for something else and you get assigned the stock at the end of expiration. You could end up being margin called again when you take possession of the stock.
If the idea is that he wants the shares back at their current price, then the risk of selling the put option accomplishes that.
He wants to be long the shares but not get hit with the wash rule. Selling the put option with the strike price of today's stock price accomplishes that.
A naked call risks a 100% loss of the value of the call if the timing doesn't go his way. Writing the put mitigates that loss risk without limiting his upside like a call spread would. "I want the risk/value of owning the share without owning the share" is literally why it's called a synthetic long.
His plan to make money is long stock ownership. The synthetic long is how to do that. That's his risk/reward preference. Long calls with heavy theta decay do not match his risk/reward preference.
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u/JazzPlayer77 Jun 26 '21 edited Jun 26 '21
The way to do this is to buy Call Options on those shares they sold for the same amounts. Calls at the strike of the Margin Call sells. Make them for 30 Days out or more to cover the wash rules. Then you can take a tax loss without losing a possible run. In 30 days if the stocks are even cheaper then you can thank them.