Is your client planning to do something as simple as buying a call option on the S&P 500? You may be surprised to learn there are various ways to do that and that each has its own taxation structure.
The taxation of investment profits is driven by the form of the investment, not the underlying referenced investment or index. As an example, all profits from any principal protected note are taxed at the highest rate, as interest income. Therefore, any value received from a principal protected note that also offers upside in the S&P 500 is taxed as interest, even if the profits stem from the index going up.
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