Last Updated on June 25, 2026 by Patrick Camuso, CPA
Quick answer (read this first):
Are crypto options taxes settled? The buyer and writer rules under established option tax law, expiration as a disposition, and the exercise and assignment adjustments are all grounded in well-established authority that applies to crypto options. The questions that remain genuinely open are around offshore and on-chain options, particularly the tax mechanics of crypto-denominated settlement and the classification of on-chain options vaults.
What determines how a crypto option is taxed? Whether the option trades on a CFTC-recognized exchange, and whether the position is held as a buyer or a writer. Those two variables determine the applicable rules, the character of the gain or loss, and when income is recognized.
What this article covers. The tax treatment of calls and puts on cryptocurrency, including how premiums are treated at purchase and sale, what happens at exercise and assignment, how expiration is handled, and how the favorable 60/40 tax treatment applies to regulated crypto options. This article covers options specifically, for the tax treatment of perpetual futures, see the Crypto Perpetual Futures Taxes guide.
What Crypto Options Are
A crypto option is a contract that gives the buyer the right, but not the obligation, to buy or sell a specified amount of a cryptocurrency at a predetermined price, called the strike price, before or on a specified expiration date. A call gives the buyer the right to buy, and a put gives the buyer the right to sell. The seller of an option, called the writer or grantor, receives a payment called the premium in exchange for taking on the corresponding obligation if the buyer exercises.
Where the option trades determines which tax rules apply. CME Group lists Bitcoin and Ether options on regulated U.S. futures markets, and those are the options that receive the most favorable tax treatment. Deribit is the largest offshore options exchange by volume and operates on a crypto-margined, cash-settled basis rather than through U.S. exchange infrastructure. On-chain protocols including Lyra, Premia, and Ribbon Finance offer options through smart contracts with no centralized custodian. Traders who hold positions across multiple venues are applying different tax rules simultaneously and need to track each venue separately.
The 60/40 Tax Treatment: When It Applies to Crypto Options
Certain regulated crypto options qualify for tax treatment that is more favorable than standard capital gains rules. Gains receive a 60/40 split, where 60 percent is taxed at long-term capital gains rates and 40 percent at short-term rates regardless of how long the position was held. Open positions are also marked to market at year-end, meaning they are treated as if sold at fair market value on December 31 whether or not they were actually closed.
To qualify, an option must not be an option on stock, and it must trade on a recognized U.S. derivatives exchange. Bitcoin and Ether are not stock, and CME is a CFTC-regulated exchange, so CME crypto options satisfy both conditions. Other crypto options listed on other regulated exchanges should be evaluated individually rather than assumed to qualify because they are regulated. The 60/40 split also assumes the position is an investment rather than part of a professional trading book, a dealer inventory, or a hedging arrangement, each of which can change the result. When a position in a qualifying option is held alongside a non-qualifying position on the same underlying, additional rules may alter the 60/40 outcome. Gains and losses on qualifying positions are reported on Form 6781, the form for regulated futures contracts and straddles, rather than on the standard capital gains form.
Buying Options: How the Premium Works
For options that do not qualify for the 60/40 treatment, gains and losses follow the general capital gains rules. Because most investors hold cryptocurrency as a long-term investment, gains and losses on their options are generally capital gains or capital losses.
When a trader buys a call or put on cryptocurrency, the premium paid is not currently deductible and does not create a taxable event at purchase. The premium is simply the cost of buying the option, and it becomes the buyer’s tax basis in the contract. Nothing is recognized until the option is closed, exercised, or expires. If the option is sold before expiration, the taxable result is the difference between the sale proceeds and the premium originally paid. The holding period of the option determines whether that result is short-term or long-term, and since most options have maturities under a year, close-outs typically produce short-term capital results. If the option expires worthless, the full premium becomes a capital loss in the year of expiration.
Exercise works differently depending on settlement method. For physically-settled options, the premium paid is absorbed into the underlying transaction rather than recognized separately. On a call, the premium is added to the tax basis of the cryptocurrency acquired. On a put, the premium reduces the amount realized on the cryptocurrency sold. For cash-settled options that pay out in cash rather than delivering crypto, there is no basis absorbed into an underlying position. The gain or loss is the net settlement payment less the premium paid.
Writing Options: Premium Deferral, Closing, and Assignment
When a trader writes an option and receives a premium, that premium is not taxable income at the time of receipt. It sits in a deferred state until the outcome of the option is determined, which is one of the things that makes options writing more complex to track than buying.
If the option expires without being exercised, the writer takes the full premium as short-term capital gain in the year of expiration, regardless of how long the position was open. If the writer closes by buying an identical option before expiration, the taxable result is the difference between the premium originally received and the cost of the closing purchase. If the option is exercised and the writer is assigned, the premium adjusts the underlying transaction. On a call assignment, the premium received is added to the proceeds from the cryptocurrency delivered to the buyer. For cash-settled written options that are exercised, the premium received offsets the net payment made on settlement rather than adjusting basis or proceeds in an underlying crypto position.
Expiration as a Taxable Event
When an option expires without being exercised, both buyer and writer recognize a taxable result in the year of expiration. The buyer takes a capital loss equal to the premium paid, while the writer takes short-term capital gain equal to the premium received, regardless of how long the option was open. Neither side has a transaction in the underlying cryptocurrency, because no purchase or sale of the underlying occurred.
Options that expire in December produce results in the current tax year, while options that expire in January produce results the following year. Traders who roll positions near year-end need to track the expiration dates of both the closing and opening legs, because they may produce income and loss in different tax years.
Deribit and Offshore Options Exchanges
Deribit is the largest crypto options exchange by volume outside of the U.S. regulated market, and its settlement mechanics differ from CME in ways that directly affect how U.S. traders account for their positions. Deribit operates on a cash-settled basis where settlement values are calculated in BTC or ETH and converted to U.S. dollars for tax reporting rather than through physical delivery of the underlying asset.
For U.S. tax purposes, a Deribit option that is closed, expires in the money, or is exercised produces a capital gain or loss measured as the net settlement value in BTC or ETH, converted to U.S. dollars at the time of settlement. Whether that gain or loss is short-term or long-term depends on the holding period of the option contract itself.
Deribit options are coin-margined, meaning the premium is paid and received in Bitcoin rather than in dollars. Paying a premium in Bitcoin is generally itself a taxable disposal of those coins, meaning the trader recognizes gain or loss on the Bitcoin used to pay the premium based on its original acquisition cost. This means a coin-margined option buyer faces up to three taxable events: a gain or loss on the Bitcoin used to pay the premium, the gain or loss on the option contract at settlement, and any gain or loss on cryptocurrency received or retained from settlement. Traders who track only the contract-level result may be significantly understating their taxable activity.
Deribit does not issue U.S. tax reporting forms comparable to the 1099s issued by U.S. exchanges. Self-reporting from account records is the only method available for U.S. traders, and data exports from Deribit should be verified for accuracy before being used for tax positions.
On-Chain Options Protocols
Options protocols built on smart contracts, including Lyra, Premia, and Ribbon Finance’s theta vaults, present the same core tax questions as exchange-traded options with several additional layers specific to the on-chain structure. Ribbon’s theta vaults and similar automated strategies involve depositing cryptocurrency into a vault that systematically writes covered calls and distributes the collected premiums to depositors.
Whether a particular vault is treated as a separate tax entity, and if so what type, is a threshold question that determines everything about how deposits, income, and withdrawals are taxed. That analysis runs parallel to the HLP vault question discussed in the Hyperliquid Taxes guide, and the IRS has not addressed entity classification for decentralized options vaults. Whether the vault constitutes a partnership, a foreign corporation, or a direct pass-through depends on its pooling structure, depositor rights, and how losses are shared.
Under a direct pass-through analysis where the depositor is treated as the option writer, the core economic return of a covered-call vault is short-term capital gain from collected option premiums in the year those premiums are recognized, not ordinary income. This is distinct from any governance or incentive tokens the protocol distributes as rewards, which are separately ordinary income at fair market value when received. On-chain protocols issue no tax reporting, and trade data must be reconstructed directly from protocol records.
Covered Calls and Straddles
Traders who hold both a long call and a short call on the same cryptocurrency, or a long put and a short put, may trigger straddle treatment under tax law. Straddle rules defer losses on one leg of the position to the extent there is still an unrecognized gain sitting in the other leg. Any costs of carrying the positions, including collateral, margin, and similar expenses, may need to be added to the tax basis of the positions rather than deducted in the current year, which is a meaningful difference for traders with significant carrying costs.
No statutory protection preserves the long-term holding period of the underlying crypto when a covered call is written against it. Whether writing the call suspends or terminates the holding period accumulated in the spot position is a question that has not been resolved under current guidance, because the existing rules were developed for stock rather than commodities. The protection stock investors rely on simply does not exist for crypto covered calls, which means a crypto covered-call strategy applied to a long-term Bitcoin position carries holding-period risk that a comparable stock strategy does not. Traders who hold appreciated cryptocurrency and are considering writing covered calls should evaluate this question with a qualified advisor before executing.
One separate question covered call writers often raise is whether writing a deep in-the-money call triggers an immediate taxable recognition of the underlying gain, as if the position had been sold. That treatment, known as a constructive sale, applies to securities.
Recordkeeping
Options position tracking requires more precision than spot trading, and the errors that occur in options recordkeeping tend to compound across years in ways that are harder to fix than errors in a simple buy-and-sell history.
Each option contract needs to be tracked individually with the premium paid or received, opening and expiration dates, strike price, underlying asset, and how the position was closed, whether by sale, expiration, or exercise. For exercised positions, the premium must be connected to the basis or proceeds adjustment in the underlying transaction, because what looks like two separate data entries in most brokerage exports is really one economic transaction. A trader who misses the premium adjustment overstates the gain on the underlying position, and that error rolls forward until the underlying asset is eventually sold.
For Deribit, the reconstruction requires capturing the BTC or ETH settlement value translated to U.S. dollars as the contract result, and also capturing the original acquisition cost of any Bitcoin used to pay the premium as a separate disposition. For on-chain options, there is no account statement, and trade data must be pulled from protocol records directly.
For traders with significant options activity across CME, Deribit, and on-chain protocols, our cryptocurrency accounting services and cryptocurrency tax preparation are built to handle options contract tracking, cost basis adjustments through exercise and assignment, coin-margined settlement reconciliation, and the year-end mark-to-market calculation.
Frequently Asked Questions
How are crypto options taxed?
The treatment depends on where the option trades and whether the position is held as a buyer or a writer. CME Bitcoin and Ether futures options receive the 60/40 split, where 60 percent of gains are taxed at long-term rates and 40 percent at short-term rates regardless of holding period, with open positions marked to market at year-end. Options on Deribit and on-chain protocols follow the standard capital gains rules, where gains and losses are capital and the holding period of the option determines whether the result is short-term or long-term.
Does the favorable 60/40 treatment apply to crypto options?
It depends on the specific contract and exchange. CME Bitcoin and Ether options on futures are widely treated as qualifying when the position is held as an investment rather than a hedge or dealer book. Other regulated crypto options should be evaluated individually. The 60/40 split and year-end mark-to-market are not available for Deribit options, on-chain protocol options, or options on any unregistered offshore venue.
How is the premium taxed when I buy a call or put?
The premium is not currently deductible and is not a taxable event at purchase, and it becomes your tax basis in the option. What happens to it depends on the outcome. If you sell the option before expiry, the premium offsets the proceeds to produce a capital gain or loss. If it expires worthless, the full premium becomes a capital loss. If the option is physically exercised, the premium is added to your basis in the cryptocurrency acquired on a call, or subtracted from your proceeds on a put. If the option is cash-settled, the premium offsets the net settlement payment to produce a net gain or loss.
How is the premium taxed when I write an option?
The premium received by a writer is not taxable income when received. It is deferred until the option closes, expires, or is exercised. If the option expires worthless, the writer recognizes the full premium as short-term capital gain in the year of expiration. If the writer buys to close, the gain or loss is the difference between the premium received and the cost to close. If the option is exercised, the premium adjusts the underlying transaction, adding to proceeds on a call assignment, or reducing the basis of cryptocurrency purchased on a put assignment.
How does Deribit options trading affect my taxes?
Deribit operates on a cash-settled, coin-margined basis rather than through physical delivery. When a Deribit option closes or expires in the money, it produces a capital gain or loss measured in BTC or ETH and translated to U.S. dollars at settlement. Because premiums are paid in Bitcoin, paying a premium is generally itself a taxable disposal of those coins, meaning a Deribit option buyer can have three separate taxable events: the Bitcoin used to pay the premium, the option contract result at settlement, and any further disposal of cryptocurrency received from settlement. Deribit does not issue U.S. tax forms, so full reconstruction from account records is required.
What records do I need for crypto options?
Each contract needs to be tracked individually with the premium paid or received, opening and expiration dates, strike price, and method of closing. For exercised positions, the premium must be linked to the basis or proceeds adjustment in the underlying transaction, because these are one economic transaction even though they appear as separate entries in most account exports. For Deribit positions, capture the BTC or ETH settlement value in U.S. dollars as the contract result and track the original cost of any Bitcoin used to pay premiums as a separate disposal. For CME positions open at year-end, retain the December 31 closing price for the mark-to-market calculation. Options are one of the areas where general crypto tax software most commonly produces incorrect results and the output should be verified carefully before filing.
This article is provided by Camuso CPA for general informational purposes and does not constitute legal, tax, accounting, or investment advice. Tax laws and regulations are evolving rapidly and the information presented may not reflect current guidance. Reading this article does not create a CPA-client relationship. For advice on your specific situation, schedule a consultation with Camuso CPA.
Camuso CPA, PLLC
