How are gains made in the options market treated come tax time? The tax consequences of an options transaction depend in part on the tax status of the investor and may differ depending on the type of underlying commodity involved.

Tax rules are not the same for equity, index, currency and debt options. Here are some other taxation factors to consider:

  • Whether an option has been exercised, has expired or is still open
  • Whether the option is covered or uncovered
  • Whether the option represents a short or long position

Typically, a long option that has been exercised results in a capital gain or loss. One that has expired without exercise results in a capital loss of the premium.

A short option that has been exercised also results in a capital gain or loss. One that has expired without exercise results in a capital gain of the premium.



Introduction

Related Articles
  1. Financial Advisor

    The Best Strategies to Manage Your Stock Options

    We look at strategies to help manage taxes and the exercise of incentive and non-qualified stock options.
  2. Trading

    Exploring European Options

    The ability to exercise only on the expiration date is what sets these options apart.
  3. Personal Finance

    What You Need to Know About Your Stock Options

    Know these things and talk to a professional to get the most out of your employee stock options.
  4. Managing Wealth

    Get The Most Out Of Employee Stock Options

    These plans can be lucrative for employees - if they know how to avoid unnecessary taxes.
  5. Trading

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  6. Trading

    Getting Acquainted With Options Trading

    Learn more about stock options, including some basic terminology and the source of profits.
  7. Trading

    American Vs. European Options

    These two options have many similar characteristics, but it's the differences that are important.
Frequently Asked Questions
  1. Who is eligible for Canada Pension Plan benefits?

    Learn more about the Canada Pension Plan, who contributes to the plan and who can receive standard, disability, early retirement ...
  2. Who are Monsanto's main competitors?

    Learn about Monsanto Company's two main operating divisions and its main competitors within each sector, including The Mosaic ...
  3. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ...
  4. Do I have to complete all exams within a certain period of time to receive the CFA charter?

    According to the CFA Institute, a candidate can take as much time as necessary to complete all three levels of the CFA program.Therefore, ...
Trading Center