I managed to get lucky.
I bought a stock on its way down and then held it long-term. The stock made so much money I didn’t want to liquidate my position because of tax implications, ruining my entire financial strategy.
With the market giving weakening signals, I decided to open a PUT for the company two months out. I paid a premium for a right to sell my shares at the given price. I figured this would be a 2026 problem for future me.
The stock had risen as high over $180. I bought future dated puts for $130 for $2.56 when the stock was around $165. The stock has plummeted in the last month, now down over 30%. However, with the puts in place, I have a hedge.
Using options, I was able to protect some of our money. However, these options are treated as regular income. You do not get long-term preferential treatment from the IRS. You also can’t avoid the gains, when the expiration date hits, an action occurs. If you want to close your position before expiration, then a taxable event occurs.
You may think that you can “roll” the options forward, but that is still a taxable event. You are still closing your current position and opening a new one.
You cannot win in every direction. You need to know what your risks are and take chances when appropriate. But also know that there is no perfect world or perfect solution.
You cannot manipulate the market. You cannot gamble your way to the top.
I tried my best to maintain our net worth and I succeeded to a degree, but now I need to look into ways to offset the income that I received.
