Question

On January 17, 2017, marina purchased a put option for $400. The option expired on August...

On January 17, 2017, marina purchased a put option for $400. The option expired on August 19, 2017. What Should marina report on her 2017 return?
A. $400 of investment expense
B. $400 of long-term capital gain
C. $400 of short term capital loss
D. No gain, loss, or expense related to this transaction.

Homework Answers

Answer #1

Answer : C. $400 of short term capital loss

Explanation

1.put option is a formal agreement between the seller and the buyer in the derivatives market

2. Put option gives right to the holder(owner) but not obligation to sell.

3. The holder of the put option sell the put option on or before expiry date to the specified party

4. The holder of the put allowed to sell his put for strike price(agreed price) on or before expiry date (maturity date)

5 . If the put option expires it is treated as short term capital loss ( these are written for one or less than year)

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