in your example, with the options expiring OTM you have a $10,000 profit on the short side and a $9.500 loss on the long side. you net $500 and that's what your get taxed on. but these are two separate reportable trades. the expiration of the short side sales price $10,000 cost $0 profit $10K and the expiration of the long side sales price $0 cost $9,500 loss $9.5K
proceeds/costs of options are not reportable until they expire unexercised. however, if an option is exercised there is no reportable gain or loss until the stock is sold
if the short side is exercised your tax basis would be the total purchase price of the stock less the net credit you received on the short option sale. thus no gain or loss until you dispose of the stock.
if you exercise the long side (assuming you don't already own the stock) your tax basis is the total cost of the stock you purchase plus the total cost of the option you purchased and the net proceeds received is your sales price.
in a tax year short -term trades are netted producing either a net S-T gain or loss
similarly with long-term trades.
if both net long-term and short-term are gains you get taxed on the total.
if either type is a loss they are netted. if the result is a net loss up to $3,000 is deductible the remainder carries over to the next year. if the result is a net gain, the entire net gain gets taxed.
if both types are losses the same $3,000 limit and carryover applies with short-term used first
