Im kinda new at trading options, and I have a tax question. I bought 50 3 months calls of company XYZ with a strike price of $20 at a cost of $7,000. XYZ was trading at around $20 at the time the calls were bought. Near expiration XYZ was trading at $30. Rather then sell these calls, and incur a $43,000 capital gain, I exercised these calls, and now own 5000 shares of XYZ. My question is: What is my basis for these 5000 shares? Is it $20 a share - the exercise price? But what about the $7000 cost of these calls - $1.40 per share. Can the $1.40 be added to the $20 resulting in a $21.40 basis? Thanks in advance!