Hello, I am interested in starting options trading, but have a concern about the tax
implications of doing so.
Hypothetically, let's say that I have a string of successful options trades (leaving out fees for simplicity's sake); I spend $1,000 to make $2,500, then re-invest that $1,500 profit to to make $4,000, then re-invest that $2,500 profit to make $5,000 profit, then I stop options trading for that tax year.
In this situation, since I had a total of $11,500 in short-term capital gains for the year from the three trades, do I have to pay taxes on the $11,500 as opposed to the $5,000 that was the final realized profit? It seems like taxes would quickly eat into any realized gains.
Also, if I made trades in a tax-advantaged account such as a Roth IRA, are the realized gains within the account counted against my gross income?