Can you leverage unused CGT allowance in the following way?

sgog

masonic said:

sgog said:

eskbanker said:

Sounds very much like the tax tail wagging the investment dog, and there are no guarantees that there'd be enough price movement over the next five weeks to give you anything to use towards the CGT allowance?

I guess you can leverage this to ensure that there's enough movement.

If you wish to trade derivatives, why not just switch over to spread betting, then all of your proceeds are tax free. The fact that 70-80% of people trading in this manner lose money should be a clue to your own likelihood of success.

I'm not talking about betting, though.
One can use derivatives to hedge its position (e.g., to sell a covered call or buy a put) or, as I suggest, create a neutral position to leverage the allowance.

sgog

eskbanker said:

sgog said:

eskbanker said:

Sounds very much like the tax tail wagging the investment dog, and there are no guarantees that there'd be enough price movement over the next five weeks to give you anything to use towards the CGT allowance?

I guess you can leverage this to ensure that there's enough movement.

But that's the fundamental point, it would involve guesswork, as well as potentially substantial funding and not insignificant risk, so you'd need to evaluate carefully if the juice is worth the squeezing - as far as I can see your arbitraging is only really motivated by a desire to use an allowance artificially, rather than to actually make money, so it seems an odd objective?

I agree that this allowance is artificial, but the tax liability on years when the market performs better is real.
I'm bad at guessing where the market is going; mostly just holding a bunch of ETFs. In a good year, this could exceed the allowance, though, especially now that it's going down.

masonic

sgog said:

masonic said:

sgog said:

eskbanker said:

Sounds very much like the tax tail wagging the investment dog, and there are no guarantees that there'd be enough price movement over the next five weeks to give you anything to use towards the CGT allowance?

I guess you can leverage this to ensure that there's enough movement.

If you wish to trade derivatives, why not just switch over to spread betting, then all of your proceeds are tax free. The fact that 70-80% of people trading in this manner lose money should be a clue to your own likelihood of success.

I'm not talking about betting, though.
One can use derivatives to hedge its position (e.g., to sell a covered call or buy a put) or, as I suggest, create a neutral position to leverage the allowance.

I'm not talking about betting either. A spread bet is a tax-efficient form of a derivative, just like the others you mention. Using spread bets would allow you to side-step the CGT issue without the loss of exposure to your underlying asset... and as you have a requirement for similar derivatives in your strategy anyway, it could be viewed as a simplification. However, in the wrong hands, use of any of these derivatives can lead to costly mistakes.

I'm reminded of the following thread, from someone who initially talked a good game, but had several 'learning experiences': https://forums.moneysavingexpert.com/discussion/6103664/mr-savers-long-term-leveraged-investment-strategy-using-leaps

Putting all that to one side, perhaps you could explain how the result would benefit you, if, for example, you went long and short on £20k equivalent of leveraged SPY and the index went up 10%? That whould leave you with a cancelling gain and loss minus fees, one of which can be crystallised within CGT alloance and the other used to offset future gains from other assets. But wouldn't you rather have the net gain, even if 10% of it had to go to the tax man ultimately?

Personally, I always prefer 90% of something over 100% of nothing. Even with the leverage, it seems the gain would be more valuable than the tax saving.