have you exercised options? tax implications how it is done

I am considering to exercise some of the options. This is mundane process, web platforms generally does not allow (not sure why is also good discussion), need to call the brokerage's actual department throgh conventional phone call, now as long as tax considered,
- once exercise there is no tax incurred as long as keep holding the stocks purchased according to contact.
- however, question becomes interesting once I decide to sell the stock.
Will tax (long ter or short term gain) is calculated using (FMV at the selling date/time - strike price?)?

 

some minor but important correction to my assumption, according to the article below,
tax=FMV at selling date/time - strike price - call option premium)

https://www.investopedia.com/articles/active-trading/053115/tax-treatment-call-put-options.asp

 

i dont know the answer to your questions. but i heard that on ameritrade you can exercise it on your own without calling them

 

Only exercised options just once. I called TD Ameritrade and instructed them to exercise the call option. So, I got shares of the stock then, I just sold the shares to lock in the capital gains. As to taxes, it is short term capital gains since, I held the shares for less than 1 year. Taxed as ordinary income at the same rate.

 

i dont know anything about taxes. whats the difference if i hold something for less then a year or more then a year?

 

If you hold a stock for one year plus one day, you get taxed at 15%, that is long term capital gains. Now, holding it for less than one year, you pay your tax rate. Say you are at 28%, that capital gain will be taxed at 28%.

 

Why would you want to exercise your options early?

 

To lock in the gains? If the stock goes down and ends up out of the money, you have lost your monies on the options premium with nothing to show for it.

 

That makes absolutely no sense.

If a stock falls below the strike price and you have exercised, you will keep losing money as you are long the stock. If you just have the calls, you will not lose anymore then the premium you paid. You will have all the upside but not the downside if you don't exercise.

It rarely ever makes sense to exercise a call early, with a few exceptions, such as an upcoming dividend and when the stock is hard to borrow.

 

Most of the time i dont bother with exercise just sell and easy, but some stock i would like to hold several years. Most option expire within 2 year.