“Taxation of Index Options,” Derivatives and Financial Instruments, IBFD, January/February 2000 DFI 2000-1 Index Options
I. INTRODUCTION
This article provides an overview of the federal income tax treatment of the proceeds arising from certain types of index options, both in the hands of the holder and in the hands of the writer. The contracts covered by this article include index options, Asian options, end-end options, cliquet options, multi-cliquet options, look-back options, lock-in options, and step-up options. Before analyzing the tax treatment of these various options, it is important to understand the general tax treatment of basic equity options.