Put and take
HOPES of a wider reform of capital gains tax are bubbling up, as so often at Budget time. They carry threats with them. I have long argued that a Chancellor wishing to stop a bull market dead in its tracks would abolish capital gains tax. All those pent-up gains would be released. All those inves- tors locked into their holdings by the fear of a huge tax bill would be free to sell. Even as the tax rules stand, there must be many investors crossing their fingers for this market and hoping that it can hold up until next month, when the new tax year starts — letting them sell and offset their gains against the new year's exemptions, and automatically deferring any tax bill for 12 months. Those whose nerves cannot stand it should now buy `put' options on the FT-SE Index. With these options, which are traded on the Stock Exchange, you win when the market goes down. If the market goes up, you can afford to lose money on your option — and that loss is allowed against capital gains tax.
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