Options Trading Tutorial

I am leaving a company and my stock options are under water, what are the tax implications?

Can I exercise the options and take a net loss for a tax deduction? If not, do I just let the options expire? Does that have any tax implications I should be aware of?

Public Comments

1. I have no idea why anyone would want to buy stock so they can take a loss. Would you like to explain that to me? There are no tax consequences for letting worthless options expire.
2. not that familiar withoptions but if they expire you lose everything. take the loss now.
3. In your Schedule D, file a loss. Now you can't buy back the stock until after a certain amount of time. So if you go in and out of the same stock and lose money, you might not be able to claim a loss.
4. if the exercise price is above the current market price then they are worthless. if the exercise price is below the current market price and you sell the shares, you will owe tax on the difference between the exercise price and the market price. For example, 45.00 exercise price 50 market price = $5 gain that will be taxed if you sell (at your marginal bracket rate). Otherwise, hold shares and pay no tax