How to sell unwanted options
I bought some call options earlier this year that have dropped to zero value. I've tried several times to sell them at market, but I have seen zero buyers.
I would like to sell them or have them declared worthless this year so I can take the tax loss. Unfortunately, my broker seems setup to handle worthless stocks but not worthless options.
They are currently researching the issue and hopefully they'll find a way to dispose of them for me but the broker on the phone didn't sound very optimistic... Short of finding someone else to purchase my contracts for a penny (and paying a commission many times that).
Is there a standard way to get rid of worthless option contracts before their expiration date?
Thank you in advance for any help that you can give with this!
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If your calls expire before the end of the year, just leave them be and they will expire. If they expire in the following year, you have a problem. Each day, you can try to sell them for a penny but the odds are slim that anyone is going to buy your worthless calls.
There is a way to get rid of them but it's going to cost you modestly. Find another call that is liquid and has a narrow bid/ask spread (the higher the strike price, the better). Execute a vertical spread order and then close the new leg. For example:
XYZ is . You own the Jan call quoted at [CO].00 x 0.05 . The Jan call is .00 x 1.05. Place a combo order to buy the Jan / vertical call spread for .05. If necessary bid .06 or .07, etc. If filled, you'll have sold your calls and bought the Jan call.
Before placing the above order, open a ticket to sell the soon to be purchased Jan calls. The moment you get a fill on the spread order, execute the second sell-to-close order at the market. All of this assumes that you get immediate execution notification. You'll have to monitor the position because you need to STC ASAP otherwise you'll add some market risk to the equation.
The cost to you will hopefully be no more than the B/A spread and if you're still paying commissions, three of them.
Before the expiration date if there is no buyers, there is no market and you cannot sell them legally.
When they will expire worthless, you will be able to claim a tax loss.
Check this publication from IRS under options
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