@drunkle
seems like the tax basis is the most important thing to note… taxing options at full income rate blows…

Yes it does… as with most taxes.. but you have extraordinary leverage with lower risk with options… if you are careful. The tax at income rate is similar to STCG(Short Term Capital Gains). Short term capital gains are for issues held less than a year, and options generally have a less than one year period. Remember that with options, you are often making a contra bet with the originators, who are often the so called experts who may be running mutual funds (They will be the ones on the short side with options).

NOTE: On options spanning more than 1 year period, I would need to check on their tax status. They may be covered by LTCG. Depends upon the amount of time the option is held.

Thanks for calling me ‘professor’.. though I really consider myself a gifted amateur. I figured that working for a salary was not going to cut it these days.. so I have set out to teach myself much of what the experts don’t tell you. In 1997 (amazing how you can remember things that change course of ones life) I re-ran numbers from a portfolio that I was going to set up in 1988 and never got around to. After much crying in my beer, I took action to learn… of course I had some more crying in my beer in 2000-2001, but it wasn’t nearly as bad as the revelation in 1997.