complicated capital gain situation

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ptrjon

Please help me understand the consequences of these recent transactions, specifically if there are any changes to the impending -call away of my shares- in a week and a half.

At my brokerage, I held 100 shares of the ultrashort oil ETF ticker: DUG. I also held 1 contract of DZGAA a $27 January call.

The fund declared a $6.06 per share capital gain distribution on 12/24. The date may or may not be correct, however the fund did drop $6 in value that day.

Then my brokerage closed out the option debiting about $400:
12/24/2008 Security Receipt DZGAA DUG Jan '09 @ 27.00 CALL

And opened a new position, crediting a strange $800:
12/24/2008 Security Delivery TYZAA DUG Jan '09 @ 27.00 CALL

And here's the capital gain:
12/31/2008 Short Term Capital Gain DUG USD 606.10

As it looks to me, I've received $606 in the capital gain. An extra $400 in the security-transfer of these calls, and the call price is still $27/share.

This seems too good to be true, anyone know what happened here?
 
When a distribution exceeds 10% of the underlying, they adjust the contract. Therefore, without looking at the terms of the adjustment, I'd surmise that you now have to deliver some cash with your shares, if called.

Go to CBOE.com or the OCC web site and do a search on DUG as well as the root symbol TYZ. That will pull up the details.
 
You file it like you file everything else. Your broker will send you the appropriate tax documents. Capital gains (losses) from the stock and options go on Scedule D. Where the distribution goes will depend on how it is defined on its tax document - dividend, cash in lieu, (add'l shares when there's another company involved), etc.

Or you can use the IRS U0US short form:

1) What's your income?
2) Send it to us!

:)
 
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