SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Herm who wrote (7442)5/12/1998 5:24:00 PM
From: john lilly  Read Replies (2) of 14162
 
Is the premium income or cap. gains?

First off, a thousand thanks to all of you who provide such important lessons and insight to those of us just starting out.

Question:
I had assumed that the premium one receives when selling CCs is considered income for tax purposes. But I also heard from someone that it actually 'reduces' your purchase price, in effect, increasing any eventual profit by the size of the premium. So if you bought X at 20 and sold a CC for 2, you reduced your purchase price to 18. So if you are called out at 25, your gain is 7, not 5. Thus the premium would be, in essence, capital gains.

That might make sense, but what if you aren't called out? Would you then apply all subsequent call premiums to the initial price (reducing the purchase price to 16..14..12 and so on)?

Can someone confirm or set me straight?

Thanks again.
-j.d.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News