SmartMoney Get email alerts  Taxes on Options: Puts and Calls
Published: Feb 8, 2012 3:29 p.m. ET  Last Updated: Feb 4, 2013
5:38 p.m. ET    For individual investors out there dabbling in
stock options for the first time, you need to know how these
securities get taxed.  For advice on those, see "Taxes on
Incentive Stock Options" and "Avoiding the AMT When Exercising
ISOs No, this time we're talking about people who are using puts
to lock in their profit on an IBM and calls to wager on the
continued climb of the latest stock-market darling.  For the
uninitiated, lets start with some definitions. A put option
gives the "holder" (the option owner) the right to sell a
specified publicly traded stock at a set price ("strike price")
on or before a specified date. A call option, on the other hand,
gives the holder the right to buy a security at a set price.
Now if instead of buying an option, you grant someone else a put
or call option, you are an option "writer." As such, you receive
a "premium" (fee) from the h