The covered call data entry experience is thoroughly broken and requires borderline dubious user workarounds which I will attempt to describe here. I too have options trades with Morgan Stanley / E*Trade. The user flow here exhibits what must be a series of software bugs - and it's been there for at least two years. (I had this same issue on my 2022 return and told my "reviewer" about it - but it's still not fixed.) When I open each trade to review it, the automated data upload system has recorded cost basis and transaction amount, but not the type. That means I must select "Option" for each one. That's fine, but if I then select that the option "Expired" (which it did) the online UI eliminates my ability to log the proceeds. Click "Expired" and watch box 1d "Proceeds" vanish from the UI! My guess is that the person who designed the interface does not understand selling covered calls, only buying calls. My workaround, which I believe "probably" leads to correct data, is to say the option was "Sold" (because it was, when I opened the contract initially) so I can include the proceeds. But wait, there's more. The online UI also asks how I "received" this investment and lets me select "I purchased it" or "I received it in a divorce settlement." Of course, neither of these is accurate. I selected "I purchased it" even though that's not happened - I opened a contract and received money for it. But wait, there's more. The "date sold or expired" and "date this investment was acquired" are flipped, thereby making them out of chronological order. I forget whether un-flipping them throws an error or the opposite does. TurboTax staff, if you're reading this please make these changes:
- Create a user flow where the user can indicate they sold a call (rather than bought one).
- Allow the user to say they "opened a contract" rather than "purchased" it.
- Allow the user to say it expired without TurboTax deleting data about the sale.
- Do not flip the dates of acquisition and disposal. Do not throw an error when these dates are correct.
- Do not throw a warning about cost basis for the covered call.
- Fix the message at the top of the page which states "Covered and reported mean the same thing." Investors selling covered calls (where "covered" means something else entirely) will be misled. Add the this sentence "The term 'covered calls' refers to a type of transaction you can enter in this interface." My guess is the PM responsible for this feature was also confused by this.
