Wave Systems Corp. (fka WAVXQ)

[rwk]

lugan,

the market value cannot change the exercise price. So you cannot exercise a $2.50 call by paying $2.60 for the shares. You can exercise the $2.50 call by paying $2.50 for the shares when the shares are worth $2.60. So the exercise gets "booked" as a purchase of shares at a price of $2.50. And for tax purposes, your cost basis becomes the $2.50 plus the option premium cost.