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Hi Fools,

First of all let me appologize if this question has been asked before. I searched for the aanswer but I just could not find it.

A beginner's question about optionsn and the long term vs short term gain/loss status:

Assume I have been holding 100 shares of XYZ for the past 7 months. The earnings season is here and I am not sure how the market is going to react to XYZ's earnings report. I am not that fond of the company anymore as when I bought the stock, but if the news is good after the earnings report I want to continue holding it for a year so I can get long-term cap gains.

I have a small profit and I want to protect it by buying puts that would exire in a month.

I have a few questions here:

1) I understand that buying a put is not a constructive sale as I only limit the loss but not the gain, right?

2) Assume that the stock tanks in the next months so I get to exercise the stock and lock in my gain. I will pay short term cap gains on the stock, right? Can I add the cost of the puts to the basis for my stock? Or how else can I take into account the fact that I paid something for the puts?

3) Assume the company does really well and the stock keeps going up. The puts just expire. If I sell the stock after a year after I originally bought it, is this going to be considered a long-term gain or short term because the holding period was reset to zero at the time when the put was bought or when the put expired? How do I take into account the price of the puts?

4) In general is it possible to add the cost of the put to the basis of the stock? Or should it be claimed as a short term loss instead?

Thank you for your answers.
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