Assignment (Exercise) of a Short Put Option
Preface: I do not download transactions from my discount broker but enter every transaction manually into Quicken myself.
On Apr 1, 2023, I sold 1 ABC $100 Jun 02 23 Put Option (100 shares) for $250, whose underlying stock I did not own, that was trading at $102. (Naked Put).
ShtSell ABC Jun 02 ’23 $100 Put as -100 (negative 100) shares.
Receive in my brokerage cash account $250 (ignoring commissions).
Holding -1 contract (100 shares) at whatever the market value is for those options.
ABC stock trades down to $95. Put options increase to $7.00. Broker notifies me that the shares have been “assigned” (exercised by the Put holder). I receive 100 common shares of ABC stock in my brokerage securities account and my brokerage cash account is charged $10,000. My basis in the underlying stock is $9,750 ($10,000 cost less $250 previously received), and the Put contract disappears from my brokerage securities account. My 100 shares of ABC stock trades at the current market value.
There is no taxable gain or loss on the assignment transaction, and I have 100 shares of ABC common stock with a basis of $9.750.
Record Bought the purchase of 100 shares of ABC stock for $100 (the option price) with the accompanying charge to your brokerage cash account of ($10,000).
Record CvrShrt 100 shares (1 contract) ABC Jun 02 ’23 $100 Put at the original option price you received for the option, in this case $250. Your Quicken Cash Amt (but not your actual brokerage cash account) will reflect a negative $250.
Record RtrnCap on ABC common stock as a positive $250 in the Amount box, leaving the Market Value box <blank>. This will reduce the basis in Quicken to $9,750 and create a positive amount of $250 in your Quicken Cash Amt (but not your actual brokerage cash account). This positive $250 will offset the negative $250 from the CvrShrt transaction, leaving no net cash effect in Quicken and will mirror the zero cash impact in your brokerage cash account.
No net taxable gain will be shown in Quicken’s Capital Gains report, consistent with your broker’s records, and you will be holding 100 shares of ABC commons stock with a basis of $9,750 at the current market value of the stock. In the example of the stock being worth $95, my shares with a basis of $9,750 have a value of $9,500, and I have a realized (but not recognized) loss of $250. I recognize the loss only when I sell the shares.