http://www.tradersaccounting.com/faq_answers.php?id=34

Note the following:

As to expiration dates, the wash sale rule should not apply to QQQ options which are identical in all respects other than time to maturity.

Note that this is opinion, not IRS precedent. But it’s probably the rule I’m going to adopt until I find solid information the contrary.

I’ll have to think more about this and do some more research on the tax consequences. For one thing, if it is a wash sale, then that also must mean that you don’t have to book any of the income either for tax purposes until the position is closed out, apparently meaning that you collect premium tax free until you let the position expire. Which seems odd.

I appreciate your feedback. Obviously I have more reading to do.

Here’s the link the the IRS.gov site that explains it along with a snippit of the text.
http://www.irs.gov/publications/p550/ch04.html#d0e12561
Wash Sales
You cannot deduct losses from sales or trades of stock or securities in a wash sale.
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:

- Buy substantially identical stock or securities,

- Acquire substantially identical stock or securities in a fully taxable trade, or

- Acquire a contract or option to buy substantially identical stock or securities.

http://www.cboe.com/Products/Cash-SettledIndexOptions.aspx

Because they are cash settled, there is no opportunity for call writing, since there is no underlying equity. Thus, if you don’t want to take a loss at assignment, your only choice is to roll-over the Option to the next month at assignment. By executing the rollover as a spread trade, you guarantee that you’ll execute both portions of the trade simultaneously, and thus you only have to concern yourself with the Net Credit you’ll receive by executing the spread.

I use Fidelity, so I can’t speak to the symbology of TD Ameritrade. However, you did find the right symbol on Yahoo! Here’s the Yahoo! list of Nov. DJX Options:

http://finance.yahoo.com/q/op?s=DJX-X.W

The more I think about this, the more I like removing the risk of assignment. You know that nothing can happen until expiration, and you know you can roll your Option over (although maybe not at a favorable Net Credit) if you don’t want to take the hit at assignment. And because you’re dealing with Index Options, the chance of going to 0 (i.e. losing all of your committed capital) is practically 0. So it becomes a pure play on the market. Except, as a Put seller, your pure play includes the collection of time premium.

And I don’t see anything that would stop you from rolling over your Option position infinitely. Of course, to save commissions, you’re better off letting winning Options expire and simply opening up a new position for the next month. But if your short Put is ITM, roll it over until the world ends and keep collecting that time premium.

I must be missing something. Am I?

Not Herbert, DJX doesn’t come up for me in TD Ameritrade. I see DJX-X.W in Yahoo!, but not with a ticker that works in AMTD. I don’t mind the potential of a pre-expiration assignment. That would just allow me to sell calls sooner, with less risk than I take when I sell calls on positions I assume will be assigned to me.

Jack, Yes we are in unchartered waters now, but to me it makes it a better time to use options. Buying puts for downside protection or selling puts with high premiums can be safer than just buying a stock outright. The same goes for calls. Look what I just did with USO. I sold a call in the money instead of selling the stock and pulled in an extra $100 more than I would have if I had just sold the shares outright. Volatility is so high that it helps increase premium costs and lessens risk some for sellers. Selling more puts than you can afford to buy the underlying shares on is rarely smart.

And the premiums are almost as fat as the DIAs. Take the Nov 80 selling for about 3.50. That gives you 10% market downside before being ITM, and you’re collecting 4% on your margined capital. Of course, that 4% is a function of the insane variability at present, so that’s not something to expect long term.

And worst case, if the Dow is at 7,000 in Nov, you roll it over to Dec., collect the premium again, and never fear getting assigned.

I’m still wet behind the ears when it comes to options, so maybe I’m missing something here. If not, seems like a sure thing.

Now if I can only gain my wife’s trust back…