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For options you wrote (sold) which expired worthless, you report the income on the date the position closed (became worthless). That makes one of your option trades 2010 income and the other 2011. The transaction gets reported on Schedule D. See the instructions for Schedule D in addition to IRS Pub. 550.

I didn't provide the answer before because the answer would have been different if your facts were different. You might have had to adjust your cost basis or sales proceeds of the underlying security or use other forms for reporting certain strategies.

Ira
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