Taxes & Tax Shelters - Taxation of Equity Options Flashcards
1
Q
Premiums paid on options are treated like commissions - they are _____ to the cost basis for the buyer and ____ from the sale proceeds for the seller.
A
added to basis for the buyer, subtracted from the proceeds for the seller
2
Q
Call holder cost basis =
A
= strike price + premium
3
Q
Call writer sale proceed =
A
= strike price + premium
4
Q
Put holder sale proceed =
A
= strike price - premium
5
Q
Put writer cost basis =
A
= strike price - premium
6
Q
When you purchase a “married” put, the premium paid for the put is _____ to the stock price to get the basis
A
added
7
Q
If a stock is held short term, and a put is purchased on that stock (not on the same day), then the stock’s holding period is ______
A
wiped out
