Issues with Calls

Bruce Buckley

I also have this problem.  I occasionally hold a call option until expiration then exercise it for the underlying security.  So the option transaction may occur in one year but the sale of the underlying security may not happen until a following year.

I have been recording the exercised call as a zero dollar sale and the purchase of the underlying security as a buy at the strike price.  But if the sale occurs in a following year, Quicken capital gains for the years are off since the "loss" associated with the premium of the exercised call is in one year and the gain or loss for the security is in the following year.  Of course the brokerage reports it correctly as all associated with the security but it renders the capital gains reports in quicken useless.

Should I record the exercised call as a sale at the purchase price to generate a zero gain transaction then record the purchase of the underlying transaction as a purchase at the strike price PLUS premium per share to generate the higher cost basis?  How will that impact the reports on portfolio returns?


Note: This conversation was created from a reply on: Exchange-Traded Call Option Planning To Exercise.

Tom Young

"Should I record the exercised call as a sale at the purchase price to
generate a zero gain transaction then record the purchase of the
underlying transaction as a purchase at the strike price PLUS premium
per share to generate the higher cost basis? "

That strikes me as the right way of doing this.  The call transaction - buy a call, exercise the call - isn't an income/loss event and your accounting would reflect that and transfer the call's cost to the strike price purchase, correctly.

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Tom Young

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Tom Young