FAQs: Put or Call Option

1. I do not hold the ordinary sort of put or call option that one can purchase on the open market. Instead, I “wrote” a put or call option that I sold to someone else. How do I report this financial interest?

The guidance provided in the Put or Call section of this guide addresses the typical investor who has purchased a contract for a put or call option from another party. This question addresses the reverse situation, which is rare for executive branch financial disclosure filers. However, if you, your spouse, or dependent child sold someone else a put or call option (i.e., “wrote the option”) on a security, you should follow the instructions in the next two paragraphs. Notwithstanding these instructions, we recommend that you contact an ethics official at your agency for further assistance if you believe these instructions are applicable to you.

By way of general guidance only in this rare case, we note that a call option that you wrote amounts, for our financial disclosure purposes, to a contractual agreement that you will sell a security to an investor, at the investor’s request, at a specified price. This agreement may also be referred to as a “short call.” Writing a put option amounts to a contractual agreement that you will buy a security from an investor, at the investor’s request, at a specified price. This agreement may also be referred to as a “short put.” In exchange for your obligation to sell or buy a security, you, as the option writer, receive a premium, and the investor must choose whether or not to exercise the option by a certain date (“expiration date”). If the option expires unexercised, your obligation ceases but you keep the premium. If the investor, however, finds it advantageous to exercise the option, you must sell or buy the security at the specified price, and your losses may exceed the value of the premium. You may choose to end your obligation prior to expiration through an offsetting transaction (i.e., buying an option contract for the same security with the same strike price and expiration date).

a. Reporting an open, outstanding option that you have written (i.e., the option has not yet expired, been exercised, or closed through an offsetting transaction):

Report the option in Schedule A if its value was more than $1,000 at the end of the reporting period, or if the option produced more than $200 in income during the reporting period.

Block A: Provide the name of the option, which should include whether the option is a call or put, the fact that you are the option writer, and the identity of the underlying security (e.g., “Widgets Unlimited (WIG), call option write”).

Block B: Report the value of the option by marking the appropriate column. If the option is “underwater” or if the value of the option is otherwise difficult to determine, write “value not readily ascertainable” in Block A and provide the following information: (1) the number of units of the security for which the option exists; (2) the strike price; and (3) the expiration date.

Block C: Report the amount of income produced during the reporting period by marking the appropriate “Amount” column. This amount would ordinarily be “None (or less than $201).”

b. Reporting an option that you have written that expired without exercise or which you closed through an offsetting transaction:

Report the option if it produced more than $200 in income during the reporting period.

Block A: Provide the name of the option, which should include whether the option was a call or put, the fact that you were the option writer, and the identity of the underlying index (e.g., “Widgets Unlimited (WIG), call option write”).

Block B: Report the value of the option by marking the appropriate column, which should be “None (or less than $1,001).”

Block C: Report the amount of income produced during the reporting period by marking the appropriate “Amount” column. You also need to report the type of income by marking the applicable “Type” column(s).

c. Reporting a call option that you have written that has been exercised (i.e., you had to buy or sell the underlying security):

Report the underlying security that you bought or sold if its value was more than $1,000 at the end of the reporting period, or if more than $200 in income was produced during the reporting period.

Block A: Provide the name of the security (e.g., “Widgets Unlimited (WIG)”).

Block B: Report the value of the security by marking the appropriate column.

Block C: Report the amount of income produced during the reporting period by marking the appropriate “Amount” column. If the amount of income is more than $200, you also need to report the type of income by marking the applicable “Type” column(s).

2. I have an option based on an index rather than an option for a particular security. How do I report that?

If exercised, options based on an index are settled for cash rather than through buying or selling an underlying security.

a. Reporting an open, outstanding option on an index (i.e., the option has not expired, been exercised, or closed through an offsetting transaction):

Report an open index option in the same manner than you would report an open option on a security. The only difference is that you will list the name of the underlying index rather than the name of an underlying security.

b. Report an index option that has been exercised or closed through an offsetting transaction:

Report the option if it produced more than $200 in income during the reporting period.

Block A: Provide the name of the option, which should include whether the option was a call or put and the identity of the underlying index (e.g., “Call option, S&P 500”). If you wrote the option, note that as well (e.g., “Call option write, S&P 500”).

Block B: Report the value of the option by marking the appropriate column, which should be “None (or less than $1,001).”

Block C: Report the amount of income produced during the reporting period by marking the appropriate “Amount” column. You also need to report the type of income by marking the applicable “Type” column(s).

c. Report an option on an index that expired:

You do not need to report an expired index option that you bought. For index options that you wrote, report the expired index option if it produced more than $200 in income during the reporting period. In such a case, report the index option in the same manner that you would report an exercised index option that produced reportable income.

 

This guide is not intended to provide investment advice, and you should not rely on statements in this guide when making investment decisions.

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