After purchasing 1800 shares of ABC at $46.08, selling covered calls with various strike prices, and exercising some, the adjusted cost basis for the remaining shares, with exercised calls factored in, is $76,466.
To calculate your cost basis in this scenario, you need to consider the initial purchase of 1800 shares and then adjust for the covered calls exercised at various strike prices.
1. Initial Purchase:
- 1800 shares at $46.08 per share.
- Total Cost = 1800 * $46.08 = $82,944.
2. Covered Calls Exercised:
- For the covered calls with a strike price below the current market price of $58.11, you would likely have your shares called away.
- Calculate the gain or loss for each set of covered calls based on the strike price and the number of shares covered.
- For the covered calls with a strike price of $50 (1 contract): No exercise.
- For the covered calls with a strike price of $52.5 (3 contracts): No exercise.
- For the covered calls with a strike price of $55 (6 contracts): No exercise.
- For the covered calls with a strike price of $57.5 (4 contracts): No exercise.
- For the covered calls with a strike price of $60 (1 contract): Exercise at $58.11.
- For the covered calls with a strike price of $62.5 (2 contracts): Exercise at $58.11.
- For the covered calls with a strike price of $65 (1 contract): Exercise at $58.11.
- Calculate the gain or loss for the exercised covered calls:
- For the $60 strike price: (60 - 46.08) * 100 shares = $1,392 gain.
- For the $62.5 strike price: (62.5 - 46.08) * 200 shares = $3,184 gain.
- For the $65 strike price: (65 - 46.08) * 100 shares = $1,902 gain.
3. Adjusted Cost Basis:
- Subtract the total gains from the initial cost:
- Adjusted Cost Basis = Initial Cost - Total Gains from Exercised Calls.
- Adjusted Cost Basis = $82,944 - ($1,392 + $3,184 + $1,902) = $76,466.
Therefore, your adjusted cost basis for the remaining shares after the covered calls would be $76,466.