Margin and option writing, professional status?

[Joe_Coconut]

Hi guys

Currently i do have a long only portfolio in etfs and funds.
Planning to activate margin and use it to finance longer term etfs holdings.
Also planning to write put options on volatile stuff I would like to buy at certain prices, like IBIT.

My wife and i both have full time jobs , so not living off the portfolio.

Could the portfolio activity be considered professional trading and trigger capital gains yaxes on the etfs? (Canton zurich)

Thanks

Best
Joe

[Your_Full_Name]

I’ve written about this here: 6 month holding rule clarification - #5 by Your_Full_Name

TL;DR: you’re mostly safe. If you fly a little lower, i.e. under the radar with being short only a few Puts on your custodian’s year end statement, you’re very safe.

[Joe_Coconut]

Thanks.

So option trades, especially if non-hedge related seem to be more critical.. i will take it easy on the options

Does anyone consider Leverage an issue? More specifically (longterm) Margin loans to buy etfs. No day trading.

[Your_Full_Name]

I can’t find the original document outlining the five or six rules that will be considered for determining whether you’re a professional trader, but I do remember one of the no-no rules is buying securities on credit.*
Again, remember that the tax man will look at the collective of your activities, and having some ETFs on credit might not be enough for him to classify you as a professional trader – if in doubt, check with the tax office ahead of time.

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* Here’s a recent article by VZ on this: Wann Privatanleger Kursgewinne versteuern müssen | VZ VermögensZentrum

[Joe_Coconut]

@Your_Full_Name

check with the tax office ahead of time.

I think that’s probably the way to go. dont want any surprises later on…

[nabalzbhf]

Honestly, especially if you’re employed I wouldn’t worry…

Even people doing day trading are not classified.

(Check previous threads)

[Helix]

@Your_Full_Name

I can’t find the original document outlining the five or six rules that will be considered for determining whether you’re a professional trader,

Kreisschreiben 36 (German), we have this discussion every fews weeks.

[PhilMongoose]

@Helix

we have this discussion every fews weeks.

Maybe I paste a link with my reply then:

Proactive professional trader status as individual

Imagine I say to the tax office: “hey. I’m a pro golfer. I want to take a tax deduction on all my golf clubs and fees at the golf club.” “no. I’m still working full time and getting paid there. i’m just practising after work.” “no. I haven’t made any money yet or won any competitions, but I in a few years I intend to win the PGA.” “well. maybe we can agree i’m already professional and I can deduct all these expenses now and you can tax me when i make money later.” “well. i guess it is true …

[Joe_Coconut]

From the source…

Die Steuerbehörden gehen in jedem Fall von einer privaten Vermögensverwaltung bzw. von
steuerfreien privaten Kapitalgewinnen aus, wenn die nachfolgenden Kriterien kumulativ
erfüllt sind.

1. Die Haltedauer der veräusserten Wertschriften beträgt mindestens 6 Monate.
2. Das Transaktionsvolumen (entspricht der Summe aller Kaufpreise und Verkaufserlöse)
   pro Kalenderjahr beträgt gesamthaft nicht mehr als das Fünffache des Wertschriften- und
   Guthabenbestands zu Beginn der Steuerperiode.
3. Das Erzielen von Kapitalgewinnen aus Wertschriftengeschäften bildet keine
   Notwendigkeit, um fehlende oder wegfallende Einkünfte zur Lebenshaltung zu ersetzen.
   Das ist regelmässig dann der Fall, wenn die realisierten Kapitalgewinne weniger als 50%
   des Reineinkommens in der Steuerperiode betragen.
4. Die Anlagen sind nicht fremdfinanziert oder die steuerbaren Vermögenserträge aus den
   Wertschriften (wie z.B. Zinsen, Dividenden, usw.) sind grösser als die anteiligen
   Schuldzinsen.
5. Der Kauf und Verkauf von Derivaten (insbesondere Optionen) beschränkt sich auf die
   Absicherung von eigenen Wertschriftenpositionen.
   Sind diese Kriterien nicht kumulativ erfüllt, kann gewerbsmässiger Wertschriftenhandel nicht
   ausgeschlossen werden. Die entsprechende Beurteilung erfolgt hierbei auf Grund sämtlicher
   Umstände des konkreten Einzelfalls (vgl. Ziff. 4).

Applyed to my case:
1-3) no problem.
4) I can use leverage, but will make sure the interest on the leverage is lower than my dividend income.
5) I wont write options.

This way, I should be guaranteed not to be classified as professional trader.

[asn1]

BlockquoteAlso planning to write put options on volatile stuff I would like to buy at certain prices, like IBIT.

For me, this is the main reason to use options.

I don’t like to use margin. The only time I used it was 15 years ago in a Swissquote account and that was by accident! I have never made that mistake again though. It cost me maybe CHF 30K.

It is a pity that all accounts allowed to trade options are called margin accounts. It wouldn’t be so bad if you could somehow enforce “leverage=0” to stop you accidentally using margin. If you only write options, your risk is much lower. If you take care not to write puts whose exercise value is greater than your account balance, then you achieve “leverage=0”.