| Long Options (buy) | If you close the position before expiration | If you exercise the option |
|---|---|---|
| Long Call | The holding period of the option determines if it's taxed at short- or long-term capital tax rates. |
• Exercising a call option increases the cost basis of the stock that is purchased. • There is no taxable event until the stock is finally sold. • Once sold, the holding period of the stock determines if the capital gain or loss is short- or long-term.
|
| Long Put | Same as above. | • Exercising a put option reduces the amount realized from the sale of the underlying stock by the cost of the put. |