Here’s a Strategy for Harvesting Short-Term Stock Losses

The key to getting around the wash sale rule is to find another stock or group of stocks that over the trailing 12 months have been highly correlated with the one you’ve sold. You then can sell your losing stock, invest the proceeds in the substitutes, and then reverse these transactions in a month’s time. The assumption behind this strategy, of course, is that securities that are highly correlated with each other over the trailing 12 months are likely to remain highly correlated for another 30 days.

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This strategy could cause massive stock losses until January.


You got it, I see this issue every year coupled with hanera’s statement on hedge funds profit taking year end to get higher bonus.

What would be a good alternative for AAPL. Berkshire?

Here it says the ETF XLK has the highest percentage of aapl at over 20%.

It seems the above data is somewhat outdated. XLK has about 17% Apple and 18% Microsoft.

Or you can buy some of apple’s suppliers. Those have high correlation and much more volatile. That means they have higher highs and lower lows.

You can temporarily short it ( your risk ) and then buy AAPL at lowest end.

Still no match to AAPL. By company, aapl is too good.

In fact, I have tried buying put lot of stocks tomorrow. All are non profit making and debt loaded stock. Do not ask what are they as I want to keep it confidential ( as people may bounce on me)

I agree with no match for Apple. XLK was correlated at the end of 12 months but APPL went up far more in the intermediate.

Is like telling us you have been watching a neighboring pretty woman bathing every evening but don’t let us visit you.

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Correlation YTD between AAPL and XLK is 0.84. That’s very high.

You might as well sell puts that expire in just over 30 days. You can set the price you’d buy at and earn yield during the 30 days. That or if you think you’ll miss gains over the next 30 days buy calls that expire after 30 days.

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Calls/Puts are related to the underlying and won’t pass the wash sale rule. Short selling also does nothing to harvest the loss.

Why do you need to do loss harvesting? You want to profit take your winners? In any case, you can sell underlying and buy LEAPS calls, they are not equivalent.

Yes they are. Check the rules.

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I read it many times, it is not. Unless they change it recently… haven’t read the rules again after I realize they are not equivalent.

I do want to harvest losses in AAPL. I have gains elsewhere and AAPL losses will offset most of them.

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Wash Sales

You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

  1. Buy substantially identical stock or securi- ties,
  2. Acquire substantially identical stock or se- curities in a fully taxable trade,
  3. Acquire a contract or option to buy sub- stantially identical stock or securities, or
  4. Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.

If you sell stock and your spouse or a corpora- tion you control buys substantially identical stock, you also have a wash sale.

Go to p.58.

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If I remember right a loss in stocks can deduct, up to a certain amount, your other taxes like W2. Check the rules.

So you’d have to buy the options 30 days before the wash sale that expire 30 days after it.