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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.

 
 
 

Published by

Shyam Murarka
(CA)
Category Students   Report

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