sold a call, it got exercised, need to record sell...

[michael]

Mark,

I copied your options instructions below...see bolded item.

When recording the sell, I enter the $ value, but what do I enter for share quantity? The system is requiring an input for shares.

Thanks,

Michael


How to Handle Selling Calls

Create a new investment to track the call. When you sell a call, record a sell transaction in this investment. To keep your total portfolio value correct, use the default cash account option to transfer the proceeds of your sell into your cash investment. While the call is outstanding, update the call's investment with the price as desired. Since you will own a negative number of shares in this investment, as the call price goes down, your total portfolio value will increase, or as the price goes up, your portfolio value will decrease.

There are three possibilities on how the call position will get closed:

If the call expires, record a purchase in this investment at a price of $0/share to close the position.
If you decide to repurchase the call, just record the purchase at the price you paid to buy back the call.
If the call gets exercised, record a purchase in the call investment at $0/share, as well as a sell in the underlying stock's investment at the option price.

[Mark]

Hi Michael,

When the call was exercised, how many shares of the stock did they purchase from you? That is how many shares of the underlying stock you must sell.

[michael]

The transaction was retrieved from Barclay's with an value equal to only the proceeds on the sale of the 500 shares of stock.

I can go into the transaction and edit the value of the sale to equal the sum of proceeds from the sale of stock at the option price and the premium that was received when we sold the call at an earlier date.

However, the transaction is linked to the cash account. So if I increase the sale amount received in the investment, it also increases the cash account as well.

I guess I have to enter a sell in the cash account for the amount of the premium received.


Does that make sense?

Thanks,
Michael

[Mark]

Hi Michael,

You should just be recording the sell of the Barclay's stock for 500 shares for the amount you received when they exercised the option. You don't add/subtract anything for the sold option.

You should have 2 separate investments, one for the option, and one for the stock.

In the option, you should have a sell for the amount you sold it for originally, and a purchase on the date it was exercised, for an amount of $0. This leaves you with 0 shares from the date it was exercised.

In the stock, you should have a sell for the 500 shares that you gave up when they exercised the option for the amount you received when they exercised the option. They bought them from you at the option price, right? If the option price was $10, then you should have received $5,000 for those 500 shares. Record a sell of the Barclay's stock at a value of $5,000 and shares of 500, and a price of $10.

You shouldn't need to enter any cash adjustments. The default cash account entries should all add up, leaving you with the right amount of cash.