Taxation of Selling Covered Calls

[vthokienj]

Anybody know how this works? I recently started writing some covered call contracts and will use RMBS as an example. I bought 100 shares at 15.02/share and sold a Jan 06 - 15.00 call for $180. Now that RMBS is close to 18.00 I bougth the same call to close out for $350, then sold a Jan 06 - 17.50 call for $220.

Now lets imagine RMBS goes to 18.00 and the call gets exercised
by somebody.

Would I report this as the following transactions:
buy 100 RMBS for $1502, sell for $1750
buy the 15.00 call for $350, sell for a loss at $180
sell the 17.50 call for $220, buy for $0

If anyone has experience with this and could provide
info that would be appreciated.

[aj14]

Anybody know how this works? I recently started writing some covered call contracts and will use RMBS as an example. I bought 100 shares at 15.02/share and sold a Jan 06 - 15.00 call for $180. Now that RMBS is close to 18.00 I bougth the same call to close out for $350, then sold a Jan 06 - 17.50 call for $220.

Now lets imagine RMBS goes to 18.00 and the call gets exercised
by somebody.

Would I report this as the following transactions:
buy 100 RMBS for $1502, sell for $1750
buy the 15.00 call for $350, sell for a loss at $180
sell the 17.50 call for $220, buy for $0

If anyone has experience with this and could provide

info that would be appreciated.


You have it correct...except that it will be over 2 tax years...the "trading" loss in the 15 calls will be this year. The gain on the 17.50 excercised covered call will be next year.