Tax Treatment of Expired (Lapsed) Options

What this video covers

• Why the expiration date, not the original trade date, is the realization date for capital gains and losses on expired options
• How to determine whether an expired option produces a capital gain (writer) or capital loss (buyer), and why the dollar amount always equals the premium
• Why standard listed options, with maximum expirations of approximately 9 months, almost always generate short-term capital gains or losses
• What Long-Term Equity AnticiPation Securities (LEAPS) are, and why their 39-month maximum expiration creates a path to long-term treatment
• When a LEAPS buyer qualifies for long-term capital gain or loss treatment (held more than 12 months) versus when the result stays short-term
• Why writers of options, even LEAPS held for multiple years, always receive short-term treatment: obligations are liabilities, not investments
• The holding-period restart trap: why exercise of a LEAPS call means the stock holding period begins fresh the day after exercise, not carried over from the option