Today’s video discusses the nuances of Last-In-First-Out (LIFO), First-In-First-Out (FIFO), and how to identify which lots you want to exit when you own multiple shares/contracts purchased at different prices. It should be of particular interest to those who scale in and out of positions and those looking to harvest tax losses properly.
Notes
LIFO, FIFO, Selecting Lots
LIFO = Last in first out
FIFO = First in first out
12/20/2021: Buy 100 shares of IWM, Cost basis: $203 unrealized loss -$2,700
6/5/2022: Buy 100 shares of IWM, Cost basis: $175, unrealized gain $100
Currently IWM at $176
I want to sell 100 shares of IWM for tax loss harvesting.
My equities tax lot ID method is LIFO
Even if I click on the 100 shares in TOS that say the Trade Price is $203 and show a $2,700 loss, it’s not selling that particular lot.
3 Contract trade
Sell 1 put for $1. Tier 1.
Sell 2nd put for $1.50 Tier 2.
Sell 3rd put for $2.00 Tier 3.
LIFO
Buy 1 put for $1.50, 50 cent gain on tier 3.
Buy 1 put for $1.00, 50 cent gain on tier 2.
Buy 1 put for 50 cents, 50 cent gain on tier 1.
Total gain: $1.50
Sell 1 put for $1. Tier 1.
Sell 2nd put for $1.50 Tier 2.
Sell 3rd put for $2.00 Tier 3.
FIFO
Buy 1 put for $1.50, 50 cent loss on tier 1.
Buy 1 put for $1.00, 50 cent gain on tier 2.
Buy 1 put for 50 cents, $1.50 gain on tier 3.
Total gain $1.50
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