In addition, this is in a regular maybe taxable account and if I hold the option should be considered a long term gain instead of short term.
Selling options short generates short term capital gains (STCG), no matter how long you hold the position. If a short covered call option is exercised, meaning you sell the underlying stock, the option premium is added to the sales proceeds, so can become a LTCG if the stock was held more than a year.
From Fidelity research:
Tax treatment of covered calls
According to Taxes and Investing, the money received from selling a covered call is not included in income at the time the call is sold. Income or loss is recognized when the call is closed either by expiring worthless, by being closed with a closing purchase transaction, or by being assigned.
If a call expires worthless, the net cash received at the time of sale is considered a short-term capital gain regardless of the length of time that the short call position was open.
If a covered call is closed with a closing purchase transaction, the net capital gain or loss is considered short term regardless of the length of time that the short call position was open.
If a covered call is assigned, the strike price plus the premium received becomes the sale price of the stock in determining gain or loss. The resulting gain or loss depends upon the holding period and the basis of the underlying stock. If the stock delivered has a holding period greater than one year, the gain or loss would be long term. |
