Imagine you have held 100 shares of stock for 10 months, and decide to sell a single option call contract with a 3 month expiration.

My understanding of the tax liability is as follows:

– If the option is exercised within 2 months (before the stock has aged a year), the profit from the sale and premium are taxed at short-term (income)

– If the option is exercised after 2 months (after the stock has aged a year), the profit from the sale and premium are taxed at long-term (capital gains)

– If the option goes un-exercised, the profit from the premium is taxed at short-term regardless. No sale to be taxed, of course.

Is this correct?