Malaga, If you read the second part of my post and someone was...

Malaga,

If you read the second part of my post and someone was trying to sell the options from a higher taxed environment to a lower taxed (e.g. tax free pension phase superannuation fund) ... selling the LOMOB at a lower price makes more sense, as it:

(a) reduces the potential capital gains ... and hence tax payable in the higher taxable environment;

(b) increases the potential capital gain in the tax free pension phase superannuation environment, which is not taxable!!

If what I suspect happened did happen ... as outlined above, t actually makes the person quite smart (as opposed t an idiot) as thy have reduced their overall potential tax liability ... had they been forced to sell the LOMOB options at a higher price.

Why then not sell he LOMOB at a lower price? Probably because they did not want to have a capital loss in their current taxable investment vehicle, which they could not offset against their income ... only future capital gains.

From a tax perspective, the suggested transactions makes sense and is beneficial ... if that was what happened.

or ... I could be wrong and they were an idiot that panicked! Either way or scenario does not impact us ... unless we were the buyer.

Zippy1