You may owe estimated taxes if you have unexpected income.
To sell or write a covered call option, the first step is the seller must own the underlying stock, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown.
In your case, you own Apple stock, which closed on June 10, 2022 at $137.13. A buyer paid you $12.60 for the right to buy your Apple shares at $137.13. This would be a great investment if Apple were to suddenly shoot up to more than $149.73 , Kiely said. “If this were to happen the buyer would `call’ away your shares,” he said. “Call options have a finite life. In this example, let’s assume 30 days. If the underlying stock doesn’t shoot up within 30 days the option expires, worthless, and the seller keeps the $12.60.”
If you sell a call option without owning the stock you have a naked position, Kiely said. If the stock shoots up and the buyer calls the option, you don’t have the shares to give to the buyer. You must buy the shares on the open market and pay whatever the price is. Naked option selling is much risker than selling covered call options, he said.As you noted, since the transaction was for less than one year, it is a short-term capital gain.are taxed as ordinary income,” Kiely said.
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