What Is the Safest Way to Avoid the Wash Sale Rule in Options Trading?
The safest way is to ensure that when realizing a loss on an option or the underlying security, the trader does not acquire any position (option or stock) that could be deemed "substantially identical" within the 30 days before or after the loss sale. This means avoiding the same strike/expiration and the underlying stock itself.
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.
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.