On Jan 3, 2013 I buy call options on stock A which expire on Jan 18,
2014. I have two possibilities:
- On Jan 5, 2014, I sell the options at a profit and the profit is treated as a Long Term Capital Gain for the tax year 2014. Is that correct? I assume the answer is "Yes"
- On Jan 5, 2014, I exercise my right to purchase Stock A at the call price and I now own the stock. I hold the stock for many years. I assume that there is no tax due for 2014 and the tax won't be due until I sell the stock. Is that correct?
Example:
Jan 3 2013 - Purchased an option for stock A with a strike of $45 for $10.
Jan 5 2014 - Exercised right to purchase stock A and paid $45
Sometime in the future I sell stock A for $75. My basis is $45 + $10 $55 and my long term capital gain = 75-55=$20. Is that correct?
In the above example what is the date of my basis - Jan 3 2013 or Jan 5
2014?