Does Holding a Futures Contract and a Substantially Offsetting Position Trigger a Constructive Sale?
Yes, if a futures contract is used to hedge a substantially appreciated financial position, it can trigger a constructive sale. The futures contract, by locking in the sale price, substantially eliminates the risk of loss and opportunity for gain on the underlying position, thereby forcing the recognition of the gain on the appreciated asset.
Glossar
Substantially Offsetting Position
Position ⎊ A substantially offsetting position, within cryptocurrency derivatives and options trading, denotes a portfolio configuration designed to neutralize or significantly diminish the directional risk exposure of an existing holding.
Futures Contract
Leverage ⎊ Futures contracts in cryptocurrency represent agreements to buy or sell an underlying asset at a predetermined price on a future date, functioning as a derivative instrument that allows for amplified exposure without immediate asset ownership.