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You know that feeling when you’re supposed to win, but you willingly take the loss anyway? Most traders would call that insane.
But let me tell you — I’ve taken losses in recent years by buying back calls for more than I sold them for, on purpose, and it was the smartest move I could make.
The Tax-Penalty Trade-Off
I didn’t want to get called out of certain stocks because doing so would create a massive tax penalty. We’re talking positions with ridiculously low cost bases — stocks I’ve held for years that have absolutely exploded.
My best example is Nvidia (NVDA), where I have a two-digit cost basis — shares are around $190 apiece today. You can imagine what happens if I get called out at any strike — the tax man gets a feast and I’m left holding the check.
So what did I do? I bought back calls that I have sold for $1.50, but they cost me $11 to buy back. Yeah, that stings big time, but compared to the tax liability I would have faced if I let my shares get called away, it was a no-brainer.
I’m still doing this with NVDA and Broadcom (AVGO), but now I’m selling calls at higher strike prices where I doubt I’ll ever get called away.
That gives me breathing room and keeps the taxman at bay.
Not every position needs that level of protection. When a trade is short term — like something I’ve only been in for a couple weeks — I don’t care if I get called out. That’s completely different from trying to avoid crushing long-term tax consequences for a stock I’ve made big gains on.
The Shift: Going Full Mercenary
Here’s where my mindset has changed…
For everything outside those big long-term winners, I’m taking a far more disciplined mercenary approach.
If I get put a stock, which simply means I got assigned after selling a put, fine. If I get called away after selling a call on shares I own, fine. I don’t care anymore — it’s all about staying on track.
That shift has been liberating because it means I don’t waste emotional energy on normal assignment risk. I save my focus for the positions that truly matter and treat everything else as tactical moves designed to keep my system running smoothly.
I did let myself get called out on some AVGO and some NVDA recently and booked some big gains. I couldn’t prevent myself from getting called out of all of it because it would have cost too much to buy back the calls, so I accepted it, took the profit and I’ll deal with the tax situation when it comes next year.
The lesson? Sometimes you have to lose a little to protect a lot, and sometimes you have to let go when it makes sense. It’s not about being right every time — it’s about making the right decision for your portfolio, your goals and your long-term strategy.
Trade well,
Jack Carter
Jack Carter Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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