I recently started using gnucash for personal accounting, but I guess this question doesn't depend on the software. I sold a covered call, and I'm not sure how to keep track of that in the double-entry accounting scheme.
So, let's say I own 250 shares of XYZ and I sell to open 2 call options for $40 with a $7 commission. Seems simple enough to record this:
ACCOUNT Debit Credit Assets:Investment 33 Expense:Commissions 7 ? 40
But that's where I start to run into trouble. For starters, what account am I debiting? I originally thought to create an income account for this (remember, I still own the 250 shares, so the $40 are coming out of thin air in a sense), but I'm not sure if that makes sense as I'd require a matching expense account if I were to buy these call options back.
I could be more rigorous and keep track of the two options I'm short (then I would debit something like Assets:Investment:Call Options). Problem is, I'm not sure how to do that in gnucash. Note that I wouldn't debit $40, I'd debit 2 call options and the price of these would vary with time.
Gnucash does a clean job with stocks in this manner, but it has no way to keep track of options (unless I'm just googling wrongly). Is there a right way to enter this in gnucash? Is there a right way to enter this in general?