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I have some call options that will expire in January 2001. They are very far out of the money and will almost certainly expire worthless. I don't think the IRS would call them worthless, because there's a (very slim) possibility that the underlying stock will quadruple in value during the next month. In the IRS's eyes, they'll be worthless when they expire, not a day before.

Assuming they do expire worthless, I'll have a short-term capital loss equal to the entire purchase price, including commissions.

I'd like to move that loss up from 2001 to 2000, by selling the calls now instead of waiting for them to expire. That would generate an extra commission, but getting the tax benefit of the loss a year early is worth more than the commission price.

The normal way to lock in a loss is to sell the asset. And I've been trying to sell these calls. Unfortunately, the lowest ask price my broker allows for options is 1/16, and they're apparently worth less than that because there have been no takers at that price.

Assuming the stock price doesn't rebound to the point where there's demand for these calls at 1/16, can anyone think of another way to dump them, that wouldn't cause the IRS to disallow my loss?

If these were shares rather than options, I could get the physical certificates and sell them to a friend for a penny. Would it be legal to sell calls without going through a broker, by writing up a contract that says that my friend now owns the calls in my account, in exchange for a penny? (This would be a bona-fide transaction -- I really would give him ownership of the calls, and he really would give me the penny.) Or is it only legal to transfer calls within the confines of option-approved broker accounts? Assuming it's legal to transfer calls that way, would the IRS likely have a problem with such a transaction?
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