Hey quick question if someone could help. Let's say you have 100 shares of a stock at $5 and 100 shares at $6. Then you sell 1 covered call contract at $7, stock moves and someone wants to exercise the option. Can you select which shares get called away? It would affect your tax liability and I was curious. Thanks if someone can answer please!
That is something your tax accountant will play around with, but its likely he will use your average cost.
For determining capital gains on equity trades, an accountant would not use the average cost for partial sales of a position purchased at different prices. The trader has the choice of designating which shares are sold and if he does not, the default position of the IRS (and broker) is FIFO. Regarding assignment, some brokers allow you to designate which shares are assigned, after the assignment.
