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Subject:  Another covered call question Date:  10/19/2001  6:24 PM
Author:  jperkinsok Number:  54709 of 127616

I recently wrote a covered call which expired in the money today. When the shares are called, I will have a net gain in the stock. Does the money I received from selling the call reduce my cost basis, thus increasing my gain? Or, is the call handled as a separate transaction entirely?

In my example, I paid $18 for the stock, then sold $25 calls for $1.25. So do I have one transaction with an overall gain of $8.25 or two separate transactions, one gaining $7 and the other gaining $1.25? I know that the net result is the same, but I want to make certain that I document everything correctly next April.

Thanks in advance for any advice.

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