SQ: tax loss harvest, or ride out?

I have a short-term loss in SQ right now, having bought prematurely on the recent decline.

I’m thinking of sell the shares now to capture the loss in 2017, then buy back (maybe) in Feb.

Bad idea?

I have a short-term loss in SQ right now, having bought prematurely on the recent decline. I’m thinking of sell the shares now to capture the loss in 2017, then buy back (maybe) in Feb.

Hi Smorgasbord,
It seems to me that it depends on where you think the shares will be in February. Did you buy in thinking of it as a short term trade, or as a long term hold. If the latter, has the story changed? By February, the stock price could be up 20% or more, or down 20% or more. I guess the issue is where you think it will be, and deciding whether to take a small tax loss, or hold because you like the stock.

Say you bought $6.00 above the current price. At a top tax bracket your saving on a tax loss would be $2.40 per share, less commissions. It sure sounds like Square could move a lot more than $2.40 by February, but remember, I’m not an accountant or a tax attorney. Just my thoughts on your question.

Saul

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You could sell, and then sell puts. I don’t know if you can sell puts right away and comply with the wash sale rules; you’d have to look that up.

Or you could sell calls on the shares you have.

You could sell, and then sell puts. I don’t know if you can sell puts right away and comply with the wash sale rules; you’d have to look that up.

Interesting. Yes, I could sell March Puts, but the premiums are less than $2.50 if I stay under the wash avoidance guideline of selling puts that are “unlikely” to be exercised (which is typically translated to mean selling out of the money Puts). Still, this is something I’m considering.

As for the $6 loss and $2.40 tax savings, that’s a pretty good guess, Saul. However, there’s also opportunity costs to consider - I could deploy that SQ money somewhere else that I feel might rise more or faster or with more certainty. Right now I’m thinking the bitcoin thing that somehow had a short term boost effect on the stock now looks to have a bit more longer lasting negative effect for a similar non-real reason. It’s just weird. I would assume Square has procedures in place to transfer bitcoin to USD immediately upon receipt to avoid the market gyrations.