Ep61 - Rich People Problems

In this episode of Wealth Building with Options, Dan Passarelli tackles a unique—but very real—challenge faced by investors with large, concentrated stock positions.

If a significant portion of your wealth is tied up in a single stock—whether from years at a company, stock-based compensation, or inheritance—you may face a difficult tradeoff:

• Sell shares and trigger a large tax bill
• Or hold the position and limit your flexibility

But what happens when you’re generating income with covered calls… and suddenly get assigned?

That’s where things can get complicated.

What You’ll Discover in This Episode

• Why concentrated stock positions can create hidden tax risks
• How covered call assignment can trigger unexpected tax consequences
• What “tax lot selection” is—and why it matters more than most traders realize
• How settlement timing (T+1) can create strategic opportunities
• A little-known tactic that may help reduce tax impact when assigned

The Core Idea

Many brokers allow you to choose which shares are sold (or assigned) when closing a position—this is called tax lot selection.

If used correctly, this can potentially:

• Protect low-cost basis shares
• Reduce taxable gains
• Give you more control over assignment outcomes

In certain situations, it may even be possible to:

• Purchase new shares
• Assign those instead of your long-held, low-basis shares

But—and this is critical—this strategy depends heavily on:

• Your broker’s capabilities
• Current tax laws
• Your specific financial situation

Important Disclaimer

This is not a one-size-fits-all strategy.

Before attempting anything discussed in this episode, you should:

• Speak with your broker
• Consult your CPA or tax professional

Rules, policies, and tax implications can vary—and mistakes here can be costly.

Why This Matters for Wheel Traders

Even if you’re not sitting on a massive concentrated position, this concept is still highly relevant.

If you trade:

• Covered calls
• Cash-secured puts
• The Wheel strategy

Understanding how assignment works at the tax lot level can give you:

• More control
• More flexibility
• Potentially better after-tax outcomes

Resources Mentioned

• Get updates and bonuses for Dan’s upcoming book:
  BCWWO.com
• Become a paid subscriber for additional training, trade ideas, and live sessions:
  wealthbuildingpodcast.com

Final Thought

Building wealth isn’t just about making money—it’s about keeping more of what you make.And sometimes, the difference comes down to knowing the rules most traders overlook.

Disclosure:

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

 

Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.  

 

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