Lab: yes, you are correct, insofar as each option contract being considered an individual investment, certainly cash sale of one option does not directly effect cost basis on another option exercised. I was looking at the total trade, from its inception, i.e. purchase of 4 calls, and subsequent sale/exercise, resulting in 1000 shares and cash.
Applying the cash from sale to the cost basis is not accurate literally, but, I believe instructive, at least in looking at the net outcome of the trade.
Regards,
James |
