In June, Bubba bought 100 shares of XYZ at $35. In November, he bought a listed put in XYZ with a $35 strike price and a July expiration for a premium of $600. If the option expires without being exercised, how is the premium expense treated by Bubba?
A)as a $600 capital loss
B)as a $600 capital gain
C)$600 is added to his acquisition cost for the stock
D)$600 is held in abeyance until the stock is eventually sold

Question

Quizplus · Accepted Answer

a $600 capital loss. The amount of premium paid is the cost and the recovery is zero, resulting in a $600 capital loss.

In June, Bubba Bought 100 Shares of XYZ at $35