24 March 2003 Internal T.I. 2003-0184127 - COMMODITY OPTIONS -- summary under Timing

"Where [commodity] options that are sold are on income account and the taxpayer is not a mutual fund trust (where the mark-to-market approach is permitted), the premium received will be included in income when it is received pursuant to section 9 of the Act, provided that the recipient is absolutely entitled to the amount (that is, the amount has the 'quality of income' when received, irrespective of whether the option has been exercised). Where a taxpayer pays a premium to obtain an option that will be held on income account, the amount paid will form part of the cost of the taxpayer's inventory. Although this position does not provide symmetry and may result in timing differences in computing income, the Act does not provide another result."