If you trade listed equity or ETF options in a Canadian taxable account, the tax result depends on whether you bought or wrote the option, whether the activity is on capital or income account, and what later happens to the contract. The calendar year matters too: a covered call written in November and assigned in January cannot simply be treated as though every event occurred in January.
This guide covers listed calls and puts treated on capital account. It does not cover employee stock options, which have separate employment-benefit rules, or promise capital treatment for an active or business-like trading operation.
General information only — not tax, legal, or financial advice. Consult a qualified professional for advice specific to your situation.
Start by determining capital or income treatment
An investor cannot choose capital treatment one transaction at a time. Whether option gains and losses are on capital or income account depends on the facts and how the related securities activity is reported.
CRA’s archived Interpretation Bulletin IT-479R explains that covered-option treatment generally follows the underlying shares, while naked-option activity may be on income account. It also emphasizes consistent reporting. Investors with frequent, short-term, leveraged, or business-like options activity should obtain advice about classification before applying the capital-account examples below.
Why long and written options are different
- A long option is property you acquired. Its adjusted cost base generally includes the premium paid and eligible acquisition costs.
- A written option starts with the granting of a right to someone else. For an option on capital account, Income Tax Act section 49 generally deems the writer to have disposed of property with an adjusted cost base of nil when the option is granted.
The second point is easy to miss. Net premium received by the writer is generally a capital gain in the grant year. It is not automatically deferred until the contract closes, expires, or is exercised.
A ledger can keep a written option marked as open because its ultimate outcome is unresolved. That operational status must not be confused with the taxation year in which section 49 initially recognizes the premium.
Buying a long call or put
When you buy a call or put, the option’s ACB is generally its premium plus commission.
Example: You buy two call contracts at a premium of $3.20 per share and pay a $2 commission. Each contract controls 100 shares.
- Premium cost: 2 × 100 × $3.20 = $640
- Total option ACB: $640 + $2 = $642
- ACB per contract: $642 ÷ 2 = $321
Additional purchases of the identical option series—same underlying security, option type, strike, expiry, and contract terms—are generally pooled using the identical-property rules.
Selling a long option to close
Selling a long option is a disposition. The capital gain or loss is the sale proceeds minus the ACB of the contracts sold and eligible disposition costs.
Example: You sell one of the two contracts above for $4.50 per share and pay a $1 commission.
- Gross proceeds: 1 × 100 × $4.50 = $450
- Net proceeds: $450 − $1 = $449
- ACB of the contract sold: $321
- Capital gain: $449 − $321 = $128
The remaining contract retains its $321 ACB.
When a long option expires
The expiry of an option is a disposition. If a long call or put expires unexercised, its proceeds are nil and its remaining ACB generally becomes a capital loss at expiry.
Using the remaining contract above:
- Proceeds: $0
- Option ACB: $321
- Capital loss: $321
CRA’s capital-gains guidance also lists the expiry of an option as an exception to the usual superficial-loss treatment. Keep the expiry confirmation with the option ledger.
Exercising a long call
When a long call is exercised on capital account, section 49 generally prevents a separate disposition of the option. Instead, the option’s ACB is added to the cost of the shares acquired.
Example: You exercise one call with an ACB of $310 and a $50 strike to acquire 100 shares.
- Strike cost: 100 × $50 = $5,000
- Plus option ACB: $310
- ACB added for the 100 shares: $5,310, or $53.10 per share
Those shares then join the existing identical-property pool for the security.
Exercising a long put
Exercising a long put disposes of the underlying shares. The put’s ACB is deducted in determining the proceeds from that disposition.
Example: You hold 100 shares with a pooled ACB of $4,200 and one put with an ACB of $180 and a $45 strike.
- Strike proceeds: 100 × $45 = $4,500
- Less put ACB: $180
- Adjusted proceeds: $4,320
- Less ACB of shares: $4,200
- Capital gain: $120
Writing a call or put: record the grant-year gain
When a call or put is written on capital account, subsection 49(1) generally produces a capital gain equal to the net premium received because the deemed property’s ACB is nil.
Example: On November 15, 2025, you write three covered-call contracts at $1.80 per share and pay a $3 commission.
- Gross premium: 3 × 100 × $1.80 = $540
- Less commission: $3
- Capital gain when granted: $537 in 2025
If the calls remain open on December 31, the $537 is not moved into 2026 merely because the positions resolve next year. The grant and later resolution must remain separate in the ledger so the correct year and any subsequent adjustment can be identified.
Buying to close a written option
CRA’s IT-479R explains that when a writer on capital account acquires an offsetting option, the acquisition cost is a capital loss at that time. It should not be retroactively netted into the grant-year gain when the events fall in different years.
Suppose one contract from the November 2025 example is bought back in January 2026 for $90 plus a $1 commission:
- Grant-year capital gain attributable to that contract: $179 in 2025
- Cost of the offsetting option: $91 capital loss in 2026
If writing and closing occur in the same taxation year, the net arithmetic for that contract is an $88 gain. The ledger should still preserve both events rather than describe the original premium as untaxed deferred income.
When a written option expires
For a written option on capital account, expiry does not create a new capital gain equal to the premium. The gain was generally recognized when the option was granted.
If the option was written and expired in the same year, the result appears in one taxation year and can look like expiry-date recognition. If it was written in one year and expired in the next, moving the premium to the expiry year would report it in the wrong period.
Assignment on a written call
When a written call is exercised and the underlying shares are also on capital account, subsection 49(3) generally nullifies the original option-grant disposition and includes the option premium in the proceeds from selling the shares.
Example: You hold 100 shares with an ACB of $3,800. A written call with a $42 strike and $150 net premium is assigned.
- Strike proceeds: 100 × $42 = $4,200
- Plus option premium: $150
- Total share proceeds: $4,350
- Less share ACB: $3,800
- Capital gain: $550
The premium must not also remain as a separate capital gain.
Assignment on a written put
When a written put is exercised and the shares are on capital account, subsection 49(3.1) generally deducts the premium from the cost of the shares acquired.
Example: One written put has a $30 strike and generated a $140 net premium before assignment.
- Strike cost: 100 × $30 = $3,000
- Less option premium: $140
- Cost added for the 100 shares: $2,860, or $28.60 per share
The acquired shares then join any existing identical-property pool.
Cross-year exercise can require an amended return
Suppose you write a covered call in November 2025, report the premium as a 2025 capital gain, and the call is assigned in January 2026. Subsection 49(3) moves that premium into the 2026 share proceeds. Subsection 49(4) provides an amended-return mechanism to remove the original option gain from 2025 when its conditions and filing deadline are met.
That amendment prevents double counting, but it is not optional bookkeeping that can be ignored until the contract resolves. Preserve the grant confirmation, the resolution record, the original return, and the amendment calculation. Cross-year exercises and assignments are appropriate situations to review with a qualified tax professional.
Contract multiplier and adjusted contracts
Most listed equity and ETF options control 100 shares per contract, but adjusted contracts can have a different multiplier or deliverable after a split, merger, or other corporate action. Verify the actual contract terms before calculating premium, option ACB, or an underlying-share adjustment.
Superficial losses and options
CRA’s capital-gains guide says a loss resulting from the expiry of an option is not considered a superficial loss. Other option transactions can be less straightforward, particularly when an investor closes and replaces similar positions or combines options with the underlying security. Do not assume that a brokerage or general-purpose ACB tool will identify every identical-property question involving derivatives.
What myCostBase records today
myCostBase records supported single-leg long and written equity and ETF option transactions: buy to open, sell to close, write to open, buy to close, exercise, assignment, and expiry. The grant date, resolution date, premium, commission, strike, and contract multiplier provide the transaction history needed to review the section 49 treatment.
Individual legs of spreads, straddles, collars, and other multi-leg positions can be recorded and calculated separately when they use supported option transaction types. myCostBase does not currently group or link those legs into a named strategy or provide strategy-level matching, lifecycle management, or premium allocation.
See Options Transactions and ACB for the product workflow, the ACB tracker for Canadian investors for the broader ledger, and How to Calculate Adjusted Cost Base in Canada for the underlying identical-property calculation.
Frequently asked questions
Do I need to track adjusted cost base for options trading in Canada?
Yes, if you hold listed equity or ETF options in a taxable account and report the activity on capital account. Long options have their own cost, while writing an option generally creates a capital gain when the option is granted. Closing, exercise, assignment, and expiry can create later adjustments, so both the grant date and resolution date must be retained.
How is the premium from writing a covered call taxed in Canada?
When the activity is on capital account, section 49 generally treats the net premium as a capital gain in the year the option is granted. If the call is exercised, the premium is instead included in the proceeds from selling the shares. An exercise in a later tax year may require an amendment to the grant-year return under subsection 49(4).
What if a written option is still open at year-end?
For an option reported on capital account, the net premium is generally a capital gain in the year the option was granted even if the position remains open on December 31. Do not defer the gain solely because the option expires, is repurchased, or is exercised in a later year. A later exercise can trigger the adjustment and amended-return rules in subsections 49(3), 49(3.1), and 49(4).
What happens to ACB when a long call option is exercised?
There is no separate gain or loss on the option. The premium and eligible acquisition costs included in the option’s adjusted cost base are added to the cost of the shares acquired at the strike price.
What happens to ACB when a long put option is exercised?
Exercising a long put disposes of the underlying shares. The adjusted cost base of the put is deducted when calculating the proceeds of disposition for those shares.
What happens when a written put option is assigned?
The writer acquires the underlying shares at the strike price. When the option and shares are both reported on capital account, the premium received for granting the put reduces the cost of the shares under subsection 49(3.1).
What happens when a written call option is assigned?
The writer disposes of the underlying shares at the strike price. When the option and shares are both reported on capital account, the premium received for granting the call is included in the proceeds of that share disposition under subsection 49(3).
What is the contract multiplier and why does it matter?
The contract multiplier is the number of underlying shares controlled by one option contract, usually 100 for standard listed equity and ETF options. An incorrect multiplier misstates the premium, option cost, and any resulting adjustment to the underlying shares.
How does myCostBase handle multi-leg options strategies?
Individual legs of spreads, straddles, collars, and other multi-leg positions can be recorded and calculated separately when they use supported option transaction types. myCostBase does not currently group or link those legs into a named strategy or provide strategy-level matching, lifecycle management, or premium allocation.
myCostBase keeps option grants and later resolution events in the same transaction history as the underlying shares. Create your free myCostBase account →