r/CoveredCalls

As we approach the end of 2026, I’m looking for advice on tax planning strategies to legally reduce our taxable income and minimize our tax liability.

My spouse and I have an AGI of over $650K, including income from options trading. I’ve also realized over $200K in gains from stock sales and options trading (primarily premiums from the wheel strategy) in my taxable brokerage account.

As California residents, we’re facing a significant tax bill between federal and state taxes, along with the 3.8% Net Investment Income Tax (NIIT). At this point, it feels like the options are either to take the rest of the year off or have my employer withhold 100% of my remaining paychecks for taxes in Q4!

**Here’s what we’ve already done or are planning before year-end:**

* **401(k):** My spouse and I have both maxed out our 401(k) contributions (I maxed out my mega backdoor 401k thru my employer) .
* **Itemized deductions:** We plan to deduct eligible mortgage interest and property taxes, subject to applicable limits.
* **Tax-loss harvesting:** We’re reviewing our unrealized losses and considering selling positions before year-end to offset realized gains, while being mindful of wash-sale rules.
* **HSA:** We don’t currently have an HSA.
* **Future trading strategy:** Starting in 2027, we plan to keep long-term investments and passive trading in our individual brokerage accounts while moving options wheeling to IRA accounts where appropriate.

I understand that realizing substantial gains is a good problem to have, but I’d like to make sure we’re not overlooking any legitimate tax-saving opportunities.

**For those who have dealt with a similar situation, I’d appreciate your insights:**

1. Are there any other deductions, credits, or tax-advantaged contributions worth exploring before the end of 2026?
2. Are there any tax-planning strategies that work particularly well for high-income investors in California who generate significant stock gains and options premium income?
3. Are there any common tax mistakes or overlooked opportunities I should discuss with a CPA who specializes in investment taxation?

I’m looking for strategies that are fully compliant with IRS rules and California tax law, rather than aggressive loopholes.

Thanks in advance for sharing your experiences and suggestions!

I have been selling options for about 12 months now and have finally started to get a hang of it. Here is the process I follow. Any thoughts on how I can improve or tighten up the process?

SIZE — Total notional under 135% of capital (what I've put in plus what I've made). No more than 45% of that in credit spreads, because a dollar of spread notional is a dollar gone, while a dollar of put notional buys me the stock.

STRIKE — IV above 60%, sell the 0.13–0.15 delta. IV below 60%, sell the 0.18–0.20. High-IV names pay enough to sit far out; low-IV names don't.

DURATION — 14–21 days.

MIX — Only trade names with a market cap of over $50B to eliminate junk. 60/40 high-IV to low-IV. An example would be 60% position in NBIS, BE, MU, ALAB; 40% position in CRWD, PLTR, DELL, TSLA.

EXIT — Close at 50% of the credit and recycle the capital. If position is threatened, roll down and/or out. Never close at a loss.

Thanks for reading.

Had a nice conversation with AI that convinced me to jump in. Didn’t realize how easy the backdoor Roth was and that I qualified to do so at all. Posting details here to see if there’s anything that I’m completely overlooking.

I already max out TSP contributions annually ($24,500) with a blend of C/S/I funds, heavier in C. So I have market exposure. (I always thought I couldn’t do this AND the backdoor Roth)

I’m planning on opening up the Roth via the backdoor this upcoming week with a plan of fully funding it $7,500 and another $7,500 in January.

I’d like to buy XLF and sell out of the money call contracts, haven’t looked at what’s out there but would be aiming for delta of 0.20-0.25. Once there’s enough money in the Roth I’d like to transition to SPY calls.

Once I’m selling more than one contract I’d ladder them. I’d also like to actually use the account for covered calls because I’ve already got the boring set and forget TSP.

25 years away from being able to collect without penalty so we’ve got time.

Thoughts?

Mine are Amzn, goog, iren