20:06:19:05Accounting procedures for the purchase of call

and put options. Accounting procedures for the purchase of call and put options must be in accordance with the following principles: (1) Payment for call or put options will be recognized as a deferred asset; (2) Treat call or put options not exercised prior to expiration as a sale of the option on the expiration date and recognize the loss as a capital loss; (3) If a call option is exercised, add the consideration paid for it to the purchase price paid for the underlying securities and treat it as a capital expenditure; (4) If a put option is exercised, deduct the consideration paid for it from the price received for the underlying security and treat it as reduction of proceeds; (5) If a call or put option is terminated through a closing sale transaction, treat the difference between the consideration paid for the purchase of the call or put option and the consideration received for the closing sale transaction as a capital gain or loss.

Source: 13 SDR 75, effective December 21, 1986.