Shyam Murarka
Table 4-1. Puts and Calls
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Puts
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When a put:
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If you are the holder:
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If you are the writer:
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Is exercised
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Reduce your amount realized from sale of the underlying stock by the cost of the put.
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Reduce your basis in the stock you buy by the amount you received for the put.
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Expires
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Report the cost of the put as a capital loss on the date it expires. *
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Report the amount you received for the put as a short-term capital gain.
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Is sold by the holder
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Report the difference between the cost of the put and the amount you receive for it as a capital gain or loss. *
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This does not affect you. (But if you buy back the put, report the difference between the amounts you pay and the amount you received for the put as a short-term capital gain or loss.)
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Calls
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When a call:
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If you are the holder:
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If you are the writer:
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Is exercised
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Add the cost of the call to your basis in the stock purchased.
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Increase your amount realized on sale of the stock by the amount you received for the call.
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Expires
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Report the cost of the call as a capital loss on the date it expires. *
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Report the amount you received for the call as a short-term capital gain.
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Is sold by the holder
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Report the difference between the cost of the call and the amount you receive for it as a capital gain or loss. *
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This does not affect you. (But if you buy back the call, report the difference between the amounts you pay and the amount you received for the call as a short-term capital gain or loss.)
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*See Holders of calls and puts and Writers of calls and puts in the accompanying text to find whether your gain or loss is short term or long term.
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