Can the Wash Sale Rule Be Triggered by Trading Different Strike Prices of the Same Option?
Yes, it can be triggered. While options with different strike prices are generally not "substantially identical," if the difference in strike price is minor, or if the option is deep in-the-money, the IRS could argue they are substantially identical.
The determination is based on facts and circumstances, but to be safe, traders should assume options with similar terms may trigger the rule.
Glossar
Wash Sale Rule
Constraint ⎊ The Wash Sale Rule, within cryptocurrency, options, and derivatives trading, disallows claiming a tax loss on a sale if a substantially identical asset is purchased within a 30-day period before or after the sale date, effectively preventing artificial loss harvesting.
Strike Prices
Definition ⎊ Strike Prices represent the fixed price at which the holder of an option contract has the right, but not the obligation, to buy or sell the underlying cryptocurrency asset upon exercise.
Different Strike Prices
Volatility Spectrum ⎊ Different strike prices within cryptocurrency options represent a spectrum of potential volatility expectations, influencing derivative pricing and risk exposure.
Wash Sale
Mechanism ⎊ A wash sale, within cryptocurrency, options, and derivatives, represents the disallowance of a tax loss when substantially identical securities are repurchased within a 30-day window before or after the sale.