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<<I recently sold a NOV 25 covered call for an underlying stock. Unfortunately, the stock price shot up, and I'm sure the option will be exercised tomorrow.

I have 2 blocks of underlying shares in my port- one bought at 37.5 (~ 10 months ago) and another at 28 (~1.5 months ago).

Am I able to direct my broker to sell the lot purchased at 37.5 so that I can apply losses to capital gains for income tax purposes?>>

Sorry, Eric...but we don't deal with options questions here at the Fool. You may find that the strategy works well for you, but we don't believe in hedging our bets.

That being said, there are two answers that I'll provde. First, if you can meet the requirements for specifying your shares (read more about it in the Taxes FAQ area), you should be able to specify the shares that you want called.

Second...have you heard about the new rules with respect to constructive sales? If you are dealing with hedge issues, these are rules that you REALLY need to know and understand. Without knowing it, you may be "selling" many of the underlying shares that you are trying to hedge.

You can read more about the constructive sale rules in my multi-part series on that very issue in the Taxes FAQ area.

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