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  • Options

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    Companies may also issue their shareholders with options. If you receive an option you have the right to acquire shares in the company at a specified price, on a stipulated date. You are also able to trade these options on the stock exchange or allow them to lapse.

    Options are similar to rights and the terms are often used interchangeably. The main difference between options and rights is that options can usually be held for a much longer period than rights before they must be exercised or lapse. Options may also be issued initially to both existing shareholders and non-shareholders whilst rights can only be issued initially to existing shareholders.

    You may be familiar with a second type of option called 'exchange traded options'. These options are not created by the company but by independent third parties, and are traded on the stock exchange. Exchange traded options come in 2 forms:

    • call options-a call option is a contract which entitles its holder to buy a fixed number of shares in the designated company at a stated price on or before a specified expiry date or
    • put options-a put option is a contract which entitles its holder to sell a fixed number of shares in the designated company at a stated price on or before a specified expiry date.

    The taxation of options is similar to that of rights. Unless you deal with them regularly, the only tax consequences that may arise involve the capital gains tax measures. This is discussed in detail in the publication Guide to Capital Gains Tax.

    Last modified: 23 Dec 2019QC 16138