Investment Vehicles- Characteristics, Use and Tax

Question 1

Tax call options 9mo or less

Answer 1

Writer
Premium due to lapse - short term cap gain
due to exercise - added to sale price = long or short term gain depending on how long underlying stock is held.

Holder
expires -short term loss

Question 2

Futures Contract

Answer 2

Agreement between buyer and seller
future delivery of a commodity

Spot Price- Current market price of commodity

Open interest- # of contracts in existence

Daily Limit- max permissible price increase or decrease relative to settlement on the previous day

Most common- financial, commodity and foreign

Can be settled by Delivery or Offset (sell interest)

Question 3

Warrents

Answer 3

similar to call option
issued by corporation not created on exchange
maturities of several years not 9 months
not standardized

Question 4

Collectibles

Answer 4

Rare objects, stamps, coins, rugs, antiques
good as inflation hedge during inflationary periods
Purchased for enjoyment

Question 5

Natural resources

Answer 5

Usually negative correlation to markets
aid in diversification
elastic - highly responsive to demand

Question 6

Precious Metals

Answer 6

Can be inflation hedge

funds are good option to reduce risks of bullion or coins

Question 7

Private Placement Reg D

Answer 7

exempt from registration
35 non accredited investors
disclosure in offering circular
1M nw, income 200k s 300k jt
no residence in NW