let's say you have 50k short term gain in 2024.I'm curious - how would the short box help convert short term capital gain to long term? Doens't the short box create a short and long term cap gain? It could offset a similar dated ST/LT gain elsewhere, but I don't see how it converts STCG to LTCG?BOXX returns are like t-bill minus their fee (0.2%)But remember this is a net losing trade because borrowing via a short box will cost 3mo T-bill + a premium, but long BOXX yields 3mo T-bill minus expense ratio. I.e., you'd be borrowing at 5.7% but receiving a 5.45% return. That partially offsets the tax savingsSo if I buy BOXX and short the same amount of SPX box, it seems that I can generate capital loss that I can use immediately.
Box Spread borrowing cost is like t-bill plus ~0.3%.
So this trade would lose 0.5% every year.
If you do it with 1M, this year you'd be getting 5% = $50k capital loss.
Converting that amount from short term to long term you'd save around 20%. So you'd save $10k
vs
your cost is 1M * 0.5% = $5k
Summary: Could work if you are converting short term capital gains to long term.
you do above during 2024. your box losses will be marked to market and and cancel your short term gains.
you keep BOXX and sell it in 2025 (long term gains)
Statistics: Posted by klaus14 — Tue Jan 02, 2024 2:53 am — Replies 105 — Views 16043