Tax question

I got around $3 per share by selling a call option (the stock was called).

How do I report on my taxes the $3 gain?

Do I add the $3 to the price the stock was called at ($75 + $3) and deduct my cost basis for the stock and report this as cap. gains(long term). Yes

or, do I determine my LT cap. gains based on the selling price of $75 per share and report the $3 separately as a capital gain No.

(I assume short term since it was less than a year).


When the option expires worthless (or when you buy it back before it expires), then the option P/L is reported as a SHORT term capital gain or loss (regardless of how long you held the short option position) on Schedule D.  Use the option's expiration date (Saturday, following the 3rd Friday) as the date you 'bought' your option back at a price of zero.


Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options