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The federal tax rules concerning options are among the most complex sections of the tax code. This has led to many misunderstandings. For example, many traders have heard that some covered calls are "unqualified." What does this mean?

It means that in some situations, a trader who has opened such a position will not be able to report gains as long-term gains if and when the call is exercised and the underlying called away. This applies only if you have held the underlying for less than one year w

The naked call is probably the highest-risk option strategy of all, right?

Not necessarily.

Most options traders associate risk with specific strategies. But you might want to question this assumption, based on a different definition of risks in trading: risk is not only determined by the attributes of a strategy, but more so by when and where the position is opened.

Even the notorious uncovered call may be less risky than most traders believe, based on a few important observations. These include:

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