Having held 100 shares of GHI stock for 15 months, a customer purchases 1 GHI Jan 50 put in December. If the put is exercised before the expiration date and the long stock is delivered, which of the following statements are TRUE?
The premium is deducted from the sale proceeds.
Any gain is long-term. Because the customer already held the stock long term when he purchased the put, he was not trying to stretch a short-term gain into a long-term gain. There is no effect on his established holding period of 15 months.
Whenever a put is exercised, the stock's sale price (exercise price) is reduced by the premium paid for buying the put.