option trades

[Possi]

My dear brother just sent me his tax package with pages of stock options bought and sold. He has annotated them nicely.
I have used the TaxBook and the website to refresh my memory on this. One question I have is this;
What do I put in the description on the Sch D? Is there an example somewhere that I could see?

This time of year I'm in a fog.
Thanks for any input.
~possi

[erchess]

How are you doing this return?

Unless I am missing something, you don't actually need to know the answer to this question unless you are doing the return with paper and pencil. On every software package I have used the first step in entering a SCH D transaction was to indicate what sort of transaction it was, be it an ordinary transaction, a put, a call, a short sale or whatever. The software then asks you for the necessary information and if you have any doubts about the validity of the output you can check with software support. I do not believe that this practice would count as trying to substitute software for tax knowledge. I would also say that as long as you get the right bottom lines on the Sch D and the Return there is a real limit to how much trouble you and your client (brother or not) can get in.

[Possi]

sorry

I'm doing a Sch D and I must list the stocks traded. I did these types of trades yrs ago and don't remember if I called them "stock options" on the D or not.
My program does not ask what kind of transactions they are.
I list the stock, the date purchased, date sold,cost and sv.
My question was in listing the stock, do I put "stock options" or symbols or monkeys or what?
And no, I don't use a pencil program. Thanks for asking.

[Gene V]

I'm doing a Sch D and I must list the stocks traded. I did these types of trades yrs ago and don't remember if I called them "stock options" on the D or not.
My program does not ask what kind of transactions they are.
I list the stock, the date purchased, date sold,cost and sv.
My question was in listing the stock, do I put "stock options" or symbols or monkeys or what?
And no, I don't use a pencil program. Thanks for asking.

I would just list the stock symbols with the word options "F option" or "BA option"
or your could list number of option also, "25 F option" or 35 BA option"

[erchess]

First of all, I'm sorry

for the snippy tone of what I wrote earlier. I didn't intend it to come across the way it does, but I wrote it and must take responsibility for doing so.

It also seems I was wrong about the software package I used last year and the package I am going to use now and they both work as you described yours. The last time I dealt with a client who had bought and sold options I was working for H and R Block and I guess the software worked the way I recall it.

I have checked out IRS Pub 550 and even there I did not find the answer to your question. I tend to agree with the earlier suggestion. Of course the question only comes up when an option expires unexercised or is sold. If the option is exercised all we have is a basis adjustment.

I do actually have one more suggestion. You might PM New York Enrolled Agent or one of the authors and ask that they post here for the edification of us all.

[joanmcq]

Are you talking about a sale of options from employee stock? I just put the name of the stock and number of shares ie, 600 sh XYZ, inc. just like any other stock sale.

[Possi]

not employee stock, and thank you

No, this is just my dear brother trying to make money in a quick way on "options xpress"online. Don't think he'll be doing this again next year.

Thank you for the information. These books and all of you dear people are so helpful.

~donna

[Anarchrist]

From seminars & irs instructions, the irs wants the number of shares and the name of the company in the description, not the stock symbol. So for options I'm guessing the description would include the number of options, the name of the company, and if they were put or call options.

[Gene V]

From seminars & irs instructions, the irs wants the number of shares and the name of the company in the description, not the stock symbol. So for options I'm guessing the description would include the number of options, the name of the company, and if they were put or call options.

Your seminars might say use name of company, nothing wrong with that, but the IRS instructions says:
You can use stock ticker symbols or abbreviations to describe the property as long as they are based on the descriptions of the property as shown on Form 1099-B.
from page D-6

[JohnH]

How to make a small fortune trading options

Donna:

Tell your brother there's a sure-fire way to make a small fortune trading options in only 3 steps.

1) Begin with a large fortune.

2) Start trading

3) Stop trading when it becomes a small fortune

It's easy, simple, and guaranteed to work.

[sea-tax]

Donna:

Tell your brother there's a sure-fire way to make a small fortune trading options in only 3 steps.

1) Begin with a large fortune.

2) Start trading

3) Stop trading when it becomes a small fortune

It's easy, simple, and guaranteed to work.

John this is so true. I have never seen someone be successful at this type of investment strategy. I am sure there are people who can make it but I think they are far and few in between.
I think sometimes people just can not resist the idea of making a quick buck.

[Possi]

I Love It!

Donna:

Tell your brother there's a sure-fire way to make a small fortune trading options in only 3 steps.

1) Begin with a large fortune.

2) Start trading

3) Stop trading when it becomes a small fortune

It's easy, simple, and guaranteed to work.

I just LOVE it! Thanks for the smile!

[JohnH]

Glad you liked it

Although the last time I tried it out on a client who had one of those squirrelly statements from a 3rd-rate brokerage company, they didn't seem to appreciate my sense of humor.

They also didn't like my asking whether the broker wore a mask or a bag over his head when they met with him.

[Joe Btfsplk]

Puts and calls

My dear brother just sent me his tax package with pages of stock options bought and sold. He has annotated them nicely.
I have used the TaxBook and the website to refresh my memory on this. One question I have is this;
What do I put in the description on the Sch D? Is there an example somewhere that I could see?

This time of year I'm in a fog.
Thanks for any input.
~possi

Apparently he was buying puts and calls.
The description would be something like July $25 Widget Co Calls or July $ 25 Widget Co Puts.
If he buys them then the cost would be what he paid. If he sells a "long" position the price received would be the sales value --or it could be zero if the option expired worthless; e.g. a $ 25 call expires when the stock is only worth $ 24.

If he sells an option short and it expires worthless, then the cost is zero and the sale is the amount he received when he sold it.

[erchess]

Options Market

It seems obvious to me that the Options Market would not exist if there were not entities other than brokerage houses making money off of them. And if large hedge funds and pension funds can make money with them why can't individuals. Of the many strategies for using puts and calls I understand only two so these are the only ones that are safe for me.

Buying calls instead of the underlying securities allows me to control more stock with the same money. I can either buy a huge number of calls of one stock and then sell the call if the stock appreciates or I can buy calls on different stocks and actually buy the one that does the best, and immediately sell it at a profit or keep it for further appreciation, The worst thing that can happen with a call is that you let it expire unused and you are out chump change.

There is also a strategy for rising and sideways markets known as the covered call. You buy the security and you sell a put at a strike price say 20% higher than current market value. If the stock tanks, the few hundred dollars you got for the put will reduce your loss. If the stock appreciates, but less than or equal to 20% you simply sell it and you have your appreciation plus the money from the put. If the stock appreciates more than 20% the buyer of the put will exercise the option, and your gain will be limited to 20%. That's a fair price to pay for the insurance you had against it tanking.

As for Options Express, everyone I know who does business with them is happy there. That does not include any of my clients so I cannot comment on their statements. I understand that you can buy just about any investment from any of the World's major exchanges. They are certainly not limited to Options.