On January 31 of this year,Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share.As a result of an increase in the market value of the Mesa stock,the market price of the option increases and Mallory sells the option for $1,000 on August 4.As a result of the sale,Mallory must recognize

Question

Quizplus · Accepted Answer

The gain from selling the option is $1,000 - $800 = $200. Since the option was held for less than a year, the gain is considered a short-term capital gain (STCG).

On January 31 of This Year,Mallory Pays $800 for an Option