Taxation of Naked Put Options- Sell to Open- Canada

[expos]

I've made several of these trades in 2010 all naked. I was never assigned any shares in all cases either the option expired worthless and I kept the premium or I bought to close the position and made a profit in each case. One other thing to point out is I borrowed money from my HELOC in order to have enough money in my brokerage account for the trade to be allowed.

I read through IT479R and several websites. What I learned was that generally CRA will consider these type transactions as on account of income, however, you can elect to record these as capital gains or losses as long as you are consistent and don't switch back and forth. Seemed like a really grey area.

What I would like to do is report these as capital gains and deduct the interest I've paid on the HELOC from my taxable income. This would be best for me tax wise. I don't want to get in trouble with CRA though. Will they frown on this. Does using borrowed money change the answer one way or the other?

The options I've been writing have all been short in time period to expiry. I've been writing naked puts that expire in 3-6 weeks. Does CRA look at that and consider that as more income in nature since it's short-term and speculative? Please advise, thanks.