Low exercise price option

LEPO is a redirect to this article. Further meanings of “LEPO” can be found under Lepo (definition of terms ) .

A low exercise price option ( LEPO ) is a call option whose exercise price (English exercise price is) very low or almost zero.

properties

Such options are far in the money . The so-called intrinsic value of the option corresponds approximately to the value of the underlying . The delta of the option is therefore 1.

The price and development of the LEPO and the underlying are very similar. A LEPO can therefore be used in an investment portfolio instead of the base value.

A big difference to trading with the underlyings is the option to take a writer position ("short position"). This aspect is particularly important for those market participants who do not have access to securities lending .

Tax treatment

From a tax point of view, income from LEPOs according to German tax law is not income from capital assets (Section 20 EStG), but forward transactions in accordance with Section 23 (1), 4 EStG.

In the context of EU interest taxation, a LEPO is subject to notification (or source tax) if the underlying is a single bond .