Skip to main content
No. of Recommendations: 0
Ok, so I read a book on options investing and wrote my first covered call.

I bought 100 shares of ISRG at 243.9799
I sold one contract in ISRG at 21.30

Somehow I missed the knowledge that the option would be automatically exercised if it's in-the-money at expiration. So I'm confronted with the choice between buying the option back or allowing it to be exercised.

The current price of ISRG is 301.82 and the option is 58.10.

Essentially it would cost me 36.80 to buy the option back. If I add that to the basis cost, I would be holding 100 shares of ISRG at a gain of 21.04, which would be no bad thing as it's a good stock. Alternately I could allow it to be exercised and be 26 cents ahead.

I'm inclined to buy the option back but wanted a clarification on the pros/cons since I'm not sure I have a complete understanding of the strategy I was trying to employ.

Question: Do I get to claim the short-term options loss as a loss on my taxes and hold the stock longer to claim the lower tax rate on long term capital gains? Or does it literally change my cost basis for the stock holding?


Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.