Yes, but that's why the preferred method of implementation is using the S&P 500 futures (ES and MES) as the hedging tool during sell signals. With this method, you hold your preferred ETFs/stocks of choice forever and continue to accumulate unrealized gains indefinitely. Then on sell signals, you sell ES and MES of equivalent value to your long holdings to effectively go market neutral.
At the end of each year, you'll only owe taxes on the net result of your hedging with futures, and futures are section 1256 contracts so they are taxed as 60% long term gains / 40% short term gains regardless of holding period. In practice, I've found that this usually works out to an effective capital gains tax of less than 15% of annual profits. If a strategy returns a gross 30%, then the after-tax return would be about 25.5%.
Also, if you implement in a retirement account which many of our members do, capital gains are irrelevant.
At the end of each year, you'll only owe taxes on the net result of your hedging with futures, and futures are section 1256 contracts so they are taxed as 60% long term gains / 40% short term gains regardless of holding period. In practice, I've found that this usually works out to an effective capital gains tax of less than 15% of annual profits. If a strategy returns a gross 30%, then the after-tax return would be about 25.5%.
Also, if you implement in a retirement account which many of our members do, capital gains are irrelevant.