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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: jackrabbit who wrote (101291)	3/22/2000 2:13:00 PM
From: Gerald Walls	Respond to of 186894

Question re covered calls -- if they expire worthless, do you have to recognize the premium as ordinary income? I thought I read somewhere that you could defer recognition and just reduce your basis in the underlying stock by the premium amount. The gain is based on the time you were short the option. If you sell covered LEAPS and they expire after one year has passed then it's a LTCG. In all other cases where the option expires it's a STCG (ordinary income). When you exercise an option the price you paid for the option plus the amount you paid to exercise would be your basis. Example: If I were to exercise my ZNLAL my basis in those shares would be 72, 12 for the option plus the 60 strike price paid to exercise. This would be my basis whether I exercised right now or if I waited until expiration since the market value of the option when exercised (including the time premium) doesn't matter in the share basis calculation. To the best of my knowledge the holding period of stock acquired by the exercise of standardized options begins with the purchase date of the options.