Frequently Asked Question
Which of the following BEST describes tax treatment of a long option that expires without exercise?
A. It is a wash sale.
B. It results in a capital loss of the premium.
C. It results in a capital gain of the premium.
D.There is no transaction, so there is no tax implication.
Answer: B
Taking a long position on an option - that is, buying it - incurs a premium; not exercising the option means losing that money.
B. It results in a capital loss of the premium.
C. It results in a capital gain of the premium.
D.There is no transaction, so there is no tax implication.
Answer: B
Taking a long position on an option - that is, buying it - incurs a premium; not exercising the option means losing that money.
by
Investopedia Staff
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