| rsquo;re an investor using Quicken, you should find | | | | share of stock at a specified, or strike, price by |
| your investment record-keeping pretty | | | | some future date. |
| straight-forward. There are, however, several tricky | | | | When a call or put expires without being |
| investment transactions you may need to record, | | | | exercised—and this is the usual case—recording |
| particularly if you’re an aggressive investor | | | | the transaction is simple. If you’re the one |
| (one who’s willing to bear increased risk in the | | | | writing the call or put, just record the transaction as |
| pursuit of greater returns). These transactions involve | | | | miscellaneous income. |
| short sales, margin loans and interest, call and put | | | | Buying Calls and Puts |
| activities, employee stock options, and corporate | | | | If you’re the one buying the call or put, you |
| reorganizations. The following paragraphs briefly | | | | just record the option purchase the way you do any |
| describe how you record these other types of | | | | other stock purchase. If the call or put expires and |
| transactions. | | | | becomes worthless, just record the sale as a stock |
| Short Sales | | | | purchase with the amount set to zero. (This is the |
| A short sale occurs when you sell stock you | | | | most common case.) |
| don’t actually hold. The logic of a short sale is | | | | If, on the other hand, you sell the call or put before |
| that rather than buying low and later selling high, you | | | | the expiration date because the call or put can be |
| first buy high and then sell low. (To make the | | | | profitably exercised, you record the sale as a stock |
| transaction, you actually borrow the stock from your | | | | sale with the amount set to whatever you sell the |
| broker.) | | | | option for. |
| To record a short sale transaction in Quicken, you | | | | Exercising Calls and Puts |
| just sell a stock you don’t own. Select the | | | | You probably won’t actually exercise a call or |
| Enter Transaction command button, choose the | | | | put. You’ll probably sell it, as described above. |
| Short Sale option, and fill in the appropriate categories | | | | If you do exercise a call or buy option, however, you |
| in the Short Sale dialog box. | | | | need to record two transactions. |
| To show that these are shares you actually owe | | | | To record the exercise of a call option, first record a |
| your broker, Quicken displays the number of shares | | | | transaction that sells the call option for zero. Then |
| and the current market value as negative amounts in | | | | record a transaction that purchases the optioned |
| the Portfolio View window. | | | | number of shares at the option price. |
| To record the transaction in which you close out | | | | To record the exercise of a put option, first record a |
| your short position by buying the stock | | | | transaction that sells the put option for zero. Then |
| you’ve previously sold, you record a stock | | | | record a transaction that sells the optioned number |
| purchase in the usual way. | | | | of shares at the option price. |
| Margin Loans and Margin Interest | | | | TIP |
| If you purchase a security and the total purchase | | | | For income tax purposes, what you pay for a call |
| cost exceeds the cash balance in a brokerage | | | | needs to be counted as part of the purchase price if |
| account, Quicken assumes that you’ve | | | | you exercise the call option and purchase shares. |
| borrowed the needed cash on margin from your | | | | What you receive for a put needs to be counted as |
| broker. To show the margin loan, it displays the cash | | | | part of the sales price if you exercise the put and sell |
| balance as a negative value. | | | | shares. This can get complicated, so you may want |
| To record margin loan interest in cases where you | | | | to consult your tax advisor. |
| have a linked cash account, you record the margin | | | | Employee Stock Options |
| loan interest as an expense when you record the | | | | You can track the value of employee stock options |
| withdrawal from the linked cash account that pays | | | | in the same way that you track shares of stock. |
| the margin interest. | | | | (The purchase price in this case is zero if you |
| To record margin loan interest in cases where you | | | | don’t pay anything for the option.) The value |
| don’t have a linked cash account, choose the | | | | of the option, of course, is the difference between |
| Enter Transaction command button and choose the | | | | the exercise price and the fair market value of the |
| Margin Interest Expense option. When Quicken | | | | vested shares. |
| displays the Margin Interest Expense dialog box, use | | | | The income tax accounting for stock options can get |
| it to describe the margin interest. | | | | a little tricky, depending on whether the options are |
| Calls and Puts | | | | part of a qualified incentive stock-option plan or a |
| A call is an option to buy a share of stock. A put is | | | | nonqualified stock-option plan. You may have a |
| an option to sell a share of stock. You may write, | | | | taxable gain when you are granted or when you |
| buy, or exercise calls and puts. | | | | exercise the option, or you may have a taxable gain |
| Writing Calls and Puts | | | | only later when you sell the shares. If you have |
| When you write a call or put, what you really do is | | | | questions about the income tax treatment, consult |
| collect money from someone in return for promising | | | | your tax advisor. |
| the person the option, or chance, to buy or sell a | | | | |