Options Trading Tutorial

Do I have to pay taxes on stock options trading profits?

I was told that zero taxes are owed on options profits since you never really owned anything like real estate or stock, you only control it for a short time.

Public Comments

1. Uh, you were told wrong. Profits are taxable. You never really owned anything? Yes you did, you owned the options.
2. Wrong. Gains on options trading are taxable. As usual, "someone" is wrong.
3. Oh and did your friend tell you not to keep the profits because you didn't really have a chance to earn them?
4. You will need to pay taxes just like stocks. If you trade cash settled index options you get a better tax treatment. IRS tax code 1256 states a 60/40 tax. Meaning 60% is treated as long term gains and 40% taxed as short term gains. This can translate to hugh savings if you trade a lot of index options. Contract a qualified tax advisor for more information.