Table 4-1. Puts and Calls
|
Puts
|
||
|
When a put:
|
If you are the holder:
|
If you are the writer:
|
|
Is exercised
|
Reduce your amount realized from sale of the underlying stock by the cost of the put.
|
Reduce your basis in the stock you buy by the amount you received for the put.
|
|
Expires
|
Report the cost of the put as a capital loss on the date it expires. *
|
Report the amount you received for the put as a short-term capital gain.
|
|
Is sold by the holder
|
Report the difference between the cost of the put and the amount you receive for it as a capital gain or loss. *
|
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.)
|
|
Calls
|
||
|
When a call:
|
If you are the holder:
|
If you are the writer:
|
|
Is exercised
|
Add the cost of the call to your basis in the stock purchased.
|
Increase your amount realized on sale of the stock by the amount you received for the call.
|
|
Expires
|
Report the cost of the call as a capital loss on the date it expires. *
|
Report the amount you received for the call as a short-term capital gain.
|
|
Is sold by the holder
|
Report the difference between the cost of the call and the amount you receive for it as a capital gain or loss. *
|
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.)
|
|
*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.
|
||
CAclubindia
