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URL:  http://boards.fool.com/stock-basis-16710230.aspx

Subject:  Stock Basis Date:  2/13/2002  2:07 PM
Author:  griffinlair Number:  58916 of 121316

I am trying to determine if options premiums can be used to adjust a stocks cost basis. I know that dividends and stock splits change the cost basis but I don't know about option premiums.

Example:
buy 100 shares of XYZ @ $20/share = $2000
Sell a call option and receive a premium of 5 = $500
Is my new cost basis for the stock = 2000-500 = 1500/100 shares = $15/share
Or am I required to report the premium as a capital gain in the year that the option was written?

Another example:
I buy a Call of XYZ @ 20 with a premium of 5 = 500
Later I decide to exercise the option at 20.
Is my cost basis @ 20/share or 25 per share since I had to pay the premium to buy the option?

Thanks,
griffin
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