How do i record the closing of a short sale position which expired?

Fidelity and Quicken recorded the short sale of a "covered call option" properly with the proceeds recorded in my transactions.

When option expired, Fidelity eliminated the position and recorded my gain.

However, Quicken download did not eliminate position and did not show gain. Instead it showed "Shares Added"

How do I manually fix? I spent 2 hours on the phone with Quicken Support, but they had no answer. Strange since many people do short selling.

HELP!

Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    There's a "Cover short sale" action you need to use here.  That's on Fidelity; they got your postions correct but not the accounting.

  • Qckn2224
    Qckn2224 Member ✭✭
    Thanks for the info. At your suggestion, I used the "Cover short sale" in the action column which eliminated the position in my holdings

    However, it did not record the realized gain on the option when it expired with my gain. Half way home.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    The cover short should have cost $0 resulting in a gain of whatever premium you received for the write of the option.  You did delete the shares added, right?
  • Qckn2224
    Qckn2224 Member ✭✭
    Shares were deleted in holdings OK Done.

    I couldn't find the gains in " Itemized Categorizes" under Realized Gains. Found out that gains on your short sales will not show up in Itemized Categories but under Investing tab - Capital Gains.

    Learn something new after using Quicken for 20 years!

    Thanks for your help,You got me in the right direction.
  • Chris11
    Chris11 Member ✭✭✭
    Hopefully I'm not hijacking this thread but I think it's relevant. I sold my first covered call today. I understand I need to enter the transaction as a ShrtSell, but what do I use for the ticker symbol? I'm assuming I don't use the underlying stock (eg. AAPL) so do I just create a "dummy stock" along the lines of "AAPL Call"? Also, for number of shares should I put total shares or options contracts (shares divided by 100). Thanks.
  • YingDave
    YingDave Member ✭✭✭✭
    edited March 9
    In the past when I have sold covered calls I have entered a Miscellaneous Income transaction for the premium received. If the option expires - happy days your stock balance stays the same and you have booked income. If the option is exercised which occurs after the previous step, I enter a Sale of the stock for the strike price on the date it exercised. I don't think Covered Call is covered (pardon the pun) by a short sell transaction? Being a covered call you should already own the stock so the security is set up already?
  • Chris11
    Chris11 Member ✭✭✭
    > @YingDave said:
    > In the past when I have sold covered calls I have entered a Miscellaneous Income transaction for the premium received. If the option expires - happy days your stock balance stays the same and you have booked income. If the option is exercised which occurs after the previous step, I enter a Sale of the stock for the strike price on the date it exercised. I don't think Covered Call is covered (pardon the pun) by a short sell transaction? Being a covered call you should already own the stock so the security is set up already?

    Yes thats what I was thinking of doing. Seems the simplest approach; but then I started reading the threads and people were using ShtSell. But I like your idea better :-)
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    @YingDave
    In the US, for tax purposes, 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 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.
  • YingDave
    YingDave Member ✭✭✭✭
    @Tom Young
    OK so that's the same set of transactions but just dated differently for selling the call, and entering/adjusting the sale price if exercised at a slightly higher price. If you have entered the original buy as required Quicken should be able to report if it's short or long term gain (loss). [Don't see why you rated as unhelpful and someone else as helpful] 
  • Qckn2224
    Qckn2224 Member ✭✭
    I did NOT rate any of these comments either helpful or unhelpful.

    I don't know who did it.

    If anything, I was appreciative of all the comments from everyone!
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited March 10
    "OK so that's the same set of transactions."
    Well, although the "bottom line effect" is the same with either method you've got a piece of "capital gains"  being reported as miscellaneous income and, possibly, in the wrong year. 
    "and entering/adjusting the sale price if exercised at a slightly higher price." 
    Of course the exercise price doesn't change, it the proceeds from the sale that's affected.  And you have to remember to reverse your original miscellaneous income entry.
    "[Don't see why you rated as unhelpful and someone else as helpful] "
    I haven't rated anything in this post as either helpful or unhelpful. 
  • Rocket J Squirrel
    Rocket J Squirrel SuperUser, Windows Beta ✭✭✭✭✭
    I marked @YingDave 's comment unhelpful.
    He suggests making up a way to handle this which is idiosyncratic and will not help other users.
    When writing a covered call, the only correct transaction is Short Sale. When the call expires or is exercised, the only correct transaction is Cover Short Sale.
    Everyone is welcome to use Quicken however they like with their own data, but I would not want a future user to stumble across @YingDave 's method and think it is the correct solution.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription on Win10 Pro.
  • YingDave
    YingDave Member ✭✭✭✭
    Sorry but I did not say I was short selling a covered call, I said I was selling a Covered Call hence I own the stock. Missed the couple of words in the original post so excuse me for causing confusion. My confusion occurred because Short Selling a Covered Call is a contradiction in terms - what you are actually doing is selling a Naked Call, or selling an Uncovered Call. A high risk strategy with uncapped loss if the stock rises. No such thing as short selling a covered call.

    Investopedia
    What Is a Naked Call?

    A naked call is an options strategy in which an investor writes (sells) call options on the open market without owning the underlying security. This strategy, sometimes referred to as an uncovered call or an unhedged short call, stands in contrast to a covered call strategy, where the investor owns the underlying security on which the call options are written. A naked call can be compared with a naked put.

  • Rocket J Squirrel
    Rocket J Squirrel SuperUser, Windows Beta ✭✭✭✭✭
    edited March 10
    @YingDave You are operating under a misconception and your Investopedia quote is irrelevant.

    Ownership of the underlying stock is irrelevant.

    The call itself is an asset you do not own. Yet you are selling it. That, by definition, is a short sale.
    Quicken user since version 2 for DOS, now using QWin Premier Subscription on Win10 Pro.
  • Rocket J Squirrel
    Rocket J Squirrel SuperUser, Windows Beta ✭✭✭✭✭
    edited March 10
    And here is a more relevant Investopedia quote.
    Covered calls are a neutral strategy, meaning the investor only expects a minor increase or decrease in the underlying stock price for the life of the written call option. This strategy is often employed when an investor has a short-term neutral view on the asset and for this reason holds the asset long and simultaneously has a short position via the option to generate income from the option premium.

    Note the call option is a short position.

    https://www.investopedia.com/terms/c/coveredcall.asp#what-is-a-covered-call 
    Quicken user since version 2 for DOS, now using QWin Premier Subscription on Win10 Pro.