Does wash sale rule trigger with expiring sold call options?

Yes, this is definitely a wash sale concern. The IRS considers options contracts to be "substantially identical securities" to the underlying stock. The wash sale rule applies in a 61-day window (30 days before and 30 days after the loss transaction). For your first question - the existing call options you sold (wrote) could potentially trigger the wash sale rule if you're closing them out within that 61-day window, especially if they're deep in the money. The IRS tends to look at the economic substance of the transaction. For your second question - buying back (closing) your call options is generally less likely to trigger a wash sale than if you were buying new call options or shares. Since you're the option writer (seller) in this case, closing the position is moving you further away from ownership of the stock, not towards it. The safest approach would be to let the calls expire naturally if they're going to expire worthless, rather than actively closing them out.

I had a similar situation last year and found https://taxr.ai super helpful for figuring this out. The wash sale rules around options are seriously confusing! I was playing around with some AMD trades, took some losses, then wasn't sure how my options positions affected everything. Their analysis tool helped me understand that selling put options doesn't typically trigger a wash sale after you've sold the underlying stock at a loss, but buying call options definitely can. In your case, since you're the writer of the calls (not the buyer), it seems less likely to be a problem based on what they told me. The nice thing was they have tax pros who actually know options trading, not just basic tax stuff. They reviewed my specific trades and gave me clarity on which ones would trigger wash sales.

Just wanted to follow up about my experience with taxr.ai after checking them out based on the recommendation here. Honestly, it was exactly what I needed! I uploaded my trading history (which included some pretty complex option spreads) and got back a detailed analysis showing which trades would trigger wash sales. They specifically helped me understand that my bearish credit spreads on Tesla wouldn't trigger wash sales on my stock losses, but my long calls would. The documentation they provided made it super clear which parts of my trading activity needed special attention for tax purposes. My accountant was actually impressed with how detailed the analysis was when I shared it with him. Going to be using this every year now!

If you're dealing with complex wash sale issues, especially with options, and need to speak directly with the IRS to get official guidance, I highly recommend using https://claimyr.com to get through to an IRS agent. I spent HOURS on hold trying to speak to someone at the IRS about a similar options wash sale question and kept getting disconnected. Then I tried Claimyr and had an IRS agent on the phone within 45 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. The agent I spoke with clarified that selling calls doesn't establish a position that would trigger a wash sale after a loss on the underlying stock, but buying calls would. Totally worth it because I was able to confidently claim my tax loss without worrying about an audit.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it anyway since I was desperate to resolve a similar issue with options trades and potential wash sales. Within 35 minutes, I got a call back with an actual IRS tax specialist on the line. The agent walked me through exactly how they treat written call options that expire in the context of wash sales. Turns out the situation matters - if you're getting out of a position entirely (selling stock at a loss and letting your written calls expire), that's generally not going to trigger a wash sale. What would cause problems is if you sell at a loss but then reestablish a position through buying the stock again or purchasing calls. Saved me a ton of stress about my $4,200 loss deduction. The service actually delivered exactly what it promised.

A bit late to this thread but wanted to add some clarity on options and wash sales based on my experience: 1. SELLING calls (like you did) does NOT typically establish a position that would trigger a wash sale rule on stock you sold at a loss. 2. BUYING calls within 30 days before or after selling the stock at a loss WOULD likely trigger a wash sale. 3. If your sold calls expire worthless, that's actually ideal from a wash sale perspective - it's a clean break from the position. 4. Buying back your sold calls to close the position is also generally fine as you're reducing exposure, not increasing it. The key thing the IRS looks for is whether you're maintaining economic exposure to the same security after claiming a loss.

Has anyone used TurboTax to properly report options trades with wash sale considerations? Last year I had a similar situation and TurboTax seemed completely confused by it when I imported my trading records.

Based on my understanding of the wash sale rules and options trading, you should be fine in your situation. Since you sold call options (wrote calls) rather than bought them, and you're letting them expire, this doesn't establish a new position in the underlying security that would trigger a wash sale. The wash sale rule is designed to prevent taxpayers from claiming artificial losses while maintaining substantially the same economic position. In your case, you sold the stock at a loss and are exiting your options position entirely by letting the calls expire. This is actually moving you further away from the stock, not maintaining exposure to it. Just make sure you don't buy back into the same stock or purchase call options on it within 30 days of your original sale, and you should be able to claim that $1,800 loss without any issues. The key is that you're completely exiting the position rather than trying to maintain exposure while claiming the tax benefit.

Just to add another perspective from someone who's dealt with this exact scenario - I had a similar situation last year where I sold Tesla shares at a $2,300 loss and had written covered calls that were about to expire. I was paranoid about the wash sale rule too. After consulting with a tax professional who specializes in trading, here's what I learned: The IRS is primarily concerned with whether you're trying to have your cake and eat it too - claiming a loss while maintaining the same economic position. When you sell stock at a loss AND let your written calls expire (or buy them back to close), you're genuinely exiting the position entirely. The wash sale rule would kick in if you then turned around and bought the stock again or purchased new call options within the 61-day window. But simply being the writer of calls that expire doesn't reestablish your position - if anything, it confirms you're done with that stock. I was able to claim my full loss without any issues. Your $1,800 loss should be perfectly fine to claim as long as you don't re-enter the position through new purchases.

The consensus here is correct - your situation shouldn't trigger a wash sale. As someone who trades options regularly, I've been through similar scenarios multiple times. The key principle to remember is that the wash sale rule is about preventing artificial losses while maintaining the same economic exposure. In your case, you're doing the opposite - you sold the stock at a loss AND you're exiting your options position (either by expiration or buying back the calls to close). This is a genuine exit from the position, not an attempt to maintain exposure while claiming tax benefits. One additional point worth mentioning: even if you buy back your sold calls to close them early (rather than letting them expire), this is still generally fine from a wash sale perspective because you're the option writer. Closing a short options position reduces your obligations rather than establishing new exposure to the underlying security. The wash sale red flags would be if you sold the stock at a loss but then bought new shares or purchased call options within the 61-day window. Your current situation is actually the textbook example of how to properly exit a position while preserving your tax loss.

Great question about wash sales and options! Based on the IRS guidelines, you should be in good shape. When you sold call options (wrote covered calls), you created an obligation to potentially sell shares at the strike price - you weren't establishing a new long position in the stock. Since you've already sold the underlying shares at a loss and your written calls are expiring this Friday, you're completely exiting your position in that stock. This is exactly the opposite of what the wash sale rule is designed to prevent, which is claiming a tax loss while secretly maintaining the same economic exposure. The wash sale rule would only be triggered if you were to buy back the stock or purchase call options within 30 days before or after your loss sale. Letting your sold calls expire naturally (or even buying them back to close your obligation) doesn't reestablish a position - it confirms you're done with the stock entirely. You should be able to claim your full $1,800 loss without any wash sale concerns. Just make sure you don't re-enter the position by buying shares or call options within the 61-day wash sale window!

I've been following this discussion with great interest as I had a very similar situation a few months ago. What really helped me was understanding that the IRS focuses on the economic substance of your transactions rather than just the technical mechanics. In your case, you're doing exactly what you should do to preserve your tax loss - you sold the stock at a loss and you're letting your written call options expire naturally. This represents a complete exit from the position, which is the opposite of what triggers wash sale concerns. The fact that your calls are expiring this Friday actually works in your favor. Since the stock has dropped (making your calls likely to expire worthless), you'll have a clean conclusion to both sides of your position - the stock sale loss and the expired option obligation. One thing I learned from my tax advisor is that the IRS specifically looks for situations where taxpayers try to "have it both ways" - claiming a loss while maintaining similar exposure through derivatives. Your situation is clearly not that, since you're exiting entirely. You should feel confident claiming that $1,800 loss on your taxes. Just remember not to buy back into the same stock or purchase call options on it for at least 30 days after your original sale date to keep everything clean.