How to track options in your MSN Money Investing portfolio (283822)

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Definition of Terms

• Option
  Options are contracts that give the holder the right to buy or to sell a stock at a specific price by a specified date from the underwriter of the option.
• Strike
  In an option agreement, the price that an equity can be purchased or sold for during a specified period.
• Call
  An option that gives you the right to buy a specific stock at a specified price in a particular period.
• Put
  An option that gives the holder the right to sell a specific stock at a specified price by a particular date.
• Contract
  Options are typically sold in lots that contain a set number of shares. These contracts are typically 100 shares.
• Underwriter
  The person who first provided the option. In other words, the person who will sell the option holder the shares (in a Call) or buy shares from the option holder (in a Put).
• Premium
  The fee that the underwriter of the option receives from the initial option holder regardless whether the current holder ever exercises the option.

How to Track an Option

Method 1

As the underwriter of the option you do not really own the option itself. Therefore, we recommend that you follow these steps:

1. In the portfolio, click the name of the stock that you are selling to expand the transaction list.
   
   Note If you do not yet own the stock, and you are selling a Put, create a new transaction record for a buy of zero shares of the stock. Therefore, the stock is tracked in the portfolio.
2. In the expanded transaction list, click New.
3. In the Activity box, select Other income.
4. In the Total box, enter the income (premium) from the sale of the option.
5. In the Category box select a category for the type of income. (example, Employee stock option)
6. Click OK.
   
   This "income" value is added to the Gain column for that stock.

Method 2

If you do want to track the option symbol that you sold in your MSN Money Investing portfolio, follow these steps:

1. Open your MSN Money Portfolio Manager.
2. In the Common Tasks section, click Work with investments, and then click Record a buy.
3. In the Investment field enter the option name, the option symbol, or select the option name from the drop down list, and then click OK. The Create new investment Wizard will start.
4. Select Equity/Index Option as the type and finish answering the questions in the wizard to create the Option.
5. Select Buy to open if underwriting a Call or Sell to open if underwriting a Put.
6. Enter the remaining information, enter zero for the price, because you did not have to pay for it, and then click OK.
7. Click New to create a new transaction, and then create a Sell to close (for a Call) or a Buy to close (for a Put) activity for this same option.
8. Enter the same number of contracts (shares) and use the premium per share that you received as the price.
9. Click OK.
   
   Notes
   • If the option is exercised, enter the sale of the stock at the strike price.
   • If an option expires, you retain the premium from the sale of the option, but the stock can no longer be purchased from you at the strike price.

How to Track Options That You Purchase

To track options that you purchase, follow these steps:

1. Open your MSN Money Portfolio Manager.
2. In the Investment name field enter the option name or the symbol, and then click OK. The Create an Investment Type Wizard will start.
3. Select Equity/Index option as the type and finish by answering the questions in the wizard to create the Option..
4. Select Buy to open if purchasing a Call or Sell to o¼pen if purchasing a Put .

Note When you exercise an option to buy, add the cost of the option in to the commission of the stock purchase (or sale), and then enter an exercise transaction for that option.