Cost Basis: Definition & Example

Cost Basis

What you actually paid for a position, used to figure your gain or loss.

Cost basis is your true purchase price, including adjustments. On the wheel, every premium you collect lowers your effective cost basis on the shares, which is a big part of the edge. Your gain or loss (and your taxes) is measured against your cost basis, not the current price.

For example

Assigned 100 shares at $20 after collecting $60 in premium, your cost basis is $19.40 per share, not $20.

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Cost Basis

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