Hedging VOO against SPY options

Investing / Others
1

Hi,

I would like to buy some long puts as a hedge for my VOO assets but I see that the liquidity is not great on the date I’m choosing (July). On the opposite side we have SPY which has a great liquidity. I’m wondering if the tax man would accept that I hedge my VOO assets with SPY puts given that they are 100% correlated. The idea is of course not to actually exercise in case things go south but rather to get a “compensation” from selling the puts if market goes down.

Would this be considered a somehow “valid” and non-professional usage of stock options by taxes?

2

It literally says in the rules that you can use options to hedge risks.

3 Likes
3

But even if the stock options are not exactly on the same assets I own?

4

It’s the intent that matters :slight_smile:

(also even people doing pure bets on future, not just hedging are not classified as pro, so I wouldn’t worry too much, esp. if you have a day job)

1 Like
5

If by July you mean July 2025, your option won’t even appear on the year end statement.

More generally, I’ve written about the tax man judging you here: 6 month holding rule clarification - #5 by Your_Full_Name

(Edit: Also, @deckard , can you finally reveal the secret whether you're human or a replicant?)
2 Likes
6

You can hedge with index options, where the underlying is literally non-tradeable :zany_face:. And this what I would recommend anyway, as S&P 500 index options are very liquid. But the settlement is only in cash, obviously.