Friday May 20, 2022

Options and their taxation with small investors

Opposite contracts today are among the common instruments either for speculation or for hedging risks in all companies. From time to time, even a small investor will force them. How will a small investor tax contracts again? Let’s bleed the mischief from the opc.

The contract is nothing more than a variation of the futures contract in which the parties agree on the following terms. The person authorized (but does not have to) submit to the conclusion of the contract (these are the parameters of the trade price, date agreed in the contract) and the person obliged to enter into this contract in the future in the case of the authorized person.

In practice, it often happens that the entitled person does not decide to carry out the specified transaction and the transaction does not take place regardless of the will of the obligated person. But that’s the krsn on the options.

Against average = financial compensation for unequal contractual status
It is clear from the definition of the right of the right that the rightful person is in a position to decide, while the person is obliged to accept this decision. Logically, it is a question of unequal position of both parties regarding the future performance, and so the liable person is willing to enter into such a contractual relationship only for the provision of some financial compensation. It will be re-applied and its payment will take place regardless of whether the owner of the re-first applies it in the future or not.

In the contract, the parties agree to buy or sell a tangible asset. In order to fulfill the meaning of concluding contracts, it is appropriate that the price of this good fluctuates in time in some way depending on the market.

Most often, options are negotiated for individual stocks, stock indices, commodities traded on commodity exchanges or, for example, emission allowances, etc. subject of the contract again by two different entities.

Example of another contract between small investors:
Mr. Dlouh and Mr. Krtk negotiated a new contract. Mr. Dlouh appears on the contract as a sole proprietor and became the owner of an option to purchase one Philip Morris share at a price of K 9,000 from Mr. Krtkho. For this contract, Mr. Krtkma had to pay another premium of 800 K. The first exercise of the option expires seven months after its conclusion.

After seven months, the price of the Philip Morris event is as follows:
1. 8 000 K
2. 9 400 K
3. 12 000 K

In the first case, Mr. Dlouh did not decide to exercise the option and did not buy a share for the agreed price of 9,000 K. It is logical, or on the market to buy one share cheaper from another owner. The economic result of such a trade is the payment of the direct premium only after the conclusion of the contract. For Mr Dlouhy, it is in fact a financial loss, and for Mr Krtk it is a financial gain. Mr. Krtk will certainly be happy with such a deal.

In the second case, Mr. Dlouh will first use it again, or buy a share for 9,000 K according to the contract, and in the case of it, I can immediately sell it on the market for the market price of 9,400 K. The result is nothing but profit from this transaction for Mr. Dlouh in vi 400 K. On the other hand, he had to pay 800 K for the premium before seven months, and thus it is a loss in the final result. For Mr Krtkho, the situation is exactly mirrored. Own trade at the lower option is a loss (-400 K), but thanks to the other premium (+800 K) it realizes a profit.

In this case, Mr. Dlouh urit will use the first and first for 9,000 K one share, which has a value of 12,000 K. This is the difference of an interesting three thousand crowns. Even though the first option cost him 800 K before seven months, he realizes a very nice evaluation.

Drobn investoi: Say goodbye to that opc, day b along the jin line
In the example given, we learned how the positions of both parties to the contract developed in relation to the development of the price of the option item. In the case of taxable contracts with small investors who invest their own funds, it is necessary to get rid of the essence of options and pay attention only to the income and expenses arising from these contracts.

In the first case (Mr. Dlouh did not use the first one in the end), I give eight hundred crowns on Mr. Dlouh’s side, and I take the same piece on Mr. Krtk’s side. In terms of whether such a transaction will be taxable for Mr. Krtk according to 10 other income and for Mr. Dlouhy in the same paragraph, but as a claim. However, in his case, it is necessary for him to be able to claim some income from the sale of securities (for example, from a profitable trade with a certain trade from securities).

In the second case (the option is exercised), we only look at the money transaction again. Thus, the payment was again direct and then fulfilled from the re-contract. Such a transaction must be viewed as a separate income from the sale of securities by both parties. Here it is necessary to apply a time test, and if the time between purchase and sale does not exceed six months, it is taxed in the field of 10. Against the income from sales, there is two purchase price and any related expenses. Similarly, let’s look at the whole transaction in the same case.

Small opn contracts: The importance of a private investment club
There is no doubt that renewed contracts will remain the domain of financial institutions and all companies. On the other hand, there are investment clubs in the Czech Republic, where their members exchange their experience from investing in securities, but also have fun with similar open trades, as I described in. Urit is such an option between two members of the club an interesting competition.

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