In mid-September, Bubba sells one XYZ February 50 call at $6. It subsequently expires without being exercised. How is the premium taxed?
A)Bubba's cost of the underlying stock is reduced
B)the $600 premium is a capital gain
C)the $600 premium constitutes ordinary income
D)the $600 premium is rolled over into another XYZ call with the next longest expiration date.

Question

Quizplus · Accepted Answer

the $600 premium is capital gain. That's simply how the tax law works.

In Mid-September, Bubba Sells One XYZ February 50 Call at $6