Tax Loss Harvesting: Is opening cross possible with no cash on hand?

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PrettyCoolWorkshop
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Tax Loss Harvesting: Is opening cross possible with no cash on hand?

Post by PrettyCoolWorkshop » Tue Dec 18, 2018 10:08 am

Howdy folks.

It looks like I need to do some tax-loss harvesting before the end of the year. I intend to log into my fidelity account, do a limit order to sell ITOT at the current asking price, and immediately after execution put in a limit order at the current bid price to buy a non-identical fund. This lot to be harvested represents over 40% of my portfolio.I have substantial capital gains this year that can be partially offset. This is my plan unless I am able to, and feel secure with, performing an opening cross.

I have heard, vaguely, about the "opening cross" method, where you put in buy and sell market orders before the market opens. This would eliminate the possibility of losses from volatility during the day. I imagine it uses market orders, so crossing the bid-ask spread twice sounds non-ideal. Is this method possible if I do not have a cash position large enough for the lot I want to buy? Would this be something requiring a phone call with a broker? My attempts to google this have not turned anything up.
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livesoft
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Re: Tax Loss Harvesting: Is opening cross possible with no cash on hand?

Post by livesoft » Tue Dec 18, 2018 10:10 am

You are worrying about not much. Sure, sell at the opening cross, but don't buy. Then see how much money you have and submit a market order to buy what you want. Don't believe all that crap about bid/ask spread and market/limit orders for the trades you want to do.

You can call your broker, but I doubt they would be helpful. I can see them rolling their eyes already.

Homework for you: How many shares of ITOT exchanged hands today at the opening cross for ITOT? How about yesterday? What percentage of shares would your sell of ITOT at today's opening cross have been?
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livesoft
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Re: Tax Loss Harvesting: Is opening cross possible with no cash on hand?

Post by livesoft » Tue Dec 18, 2018 10:22 am

You can also break up your order yourself into several sells, then buys. Presumably, all are no-commission trades at Fidelity, so you can learn some things just by doing that and experimenting with some of your ideas.

The spread of ITOT is 1 cent, so only Fidelity can screw you and they can do that no matter what you do.
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Re: Tax Loss Harvesting: Is opening cross possible with no cash on hand?

Post by PrettyCoolWorkshop » Tue Dec 18, 2018 10:50 am

Thanks for the replies, livesoft. I agree that I'm worrying about small potatoes.

As a sanity check, the bid-ask spread for ITOT is $0.02 on a share price of $58.09. Crossing this spread twice (assuming the replacement fund is similar) costs .068% of your trade, or $68.85 for every $100k invested. I'm picking nits, I suppose, but $68 is a nice dinner for two!

But your response did make me realize that I could "batch" my harvesting by using the small amount of cash I do have to enable simultaneous trades on open. I would just have to make sure I have enough days left in the year to get all of my batches in. Thanks. Whether that is worth the trouble is something for me to stew about.
Be greedy and fearful. All the time.

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