I am not too sure about the location where this should be posted but as my question relates primarily to derivatives, I have chosen to post here. Please forgive me if incorrect
Is the interest cost of redrawing funds from a line of credit (secured against property) tax deductible if used for margins cover when writing put options?
Scenario: I am considering writing put options on against shares I would be happy to own as (a) a cashflow strategy and (b) a chance to buy below current market prices.
For example considering using $50K in redraw - interest rate of 8% pa.
Funds placed into cash management account for margin cover, account paying 5% interest pa.
Put options written against XYZ shares where total position is $50K. Premium received is $1000 net of brokerage.
This is repeated each month.
I guess other questions would be:
Is interest received from cash management account taxable? I guess so.
Is interest costs from LOC deductible on the full $50K
Hope you can provide some initial answers.