Cost basis is the total amount you paid to acquire a position, including any fees, and it is the figure your gain or loss is measured against.
Last reviewed 17 September 2025 · Educational, not advice
Cost basis is the price you paid to acquire a position plus any transaction costs, and it is the reference point from which a gain or loss is calculated when you close or settle. If you buy 100 contracts at 40 cents and pay a small fee, your cost basis is the 40 dollars plus that fee. When the position resolves or you sell, the difference between the proceeds and the cost basis is your realised gain or loss.
Getting cost basis right matters most at tax time. Many tax systems tax the gain, which is proceeds minus cost basis, rather than the gross proceeds. If you understate your cost basis you may overstate your gain and pay more than you owe. Keeping accurate records of what you paid, including fees, for every position is the foundation of correct reporting.
When you buy the same contract at different prices, cost basis can be tracked in more than one way. Some people use an average cost across all the units they hold, while some tax rules require a specific method such as first in first out, where the earliest units bought are treated as the first ones sold. The method you are allowed or required to use depends on your jurisdiction and the rules in force.
Fees and adjustments belong in the basis. Acquisition fees usually add to your cost basis, which lowers the taxable gain, while selling fees usually reduce your proceeds. The detail varies by jurisdiction, so the practical rule is to keep every confirmation and fee record so that the basis you report can be supported.
Cost basis is an accounting figure, not a measure of risk or value. It tells you what you paid, not what a position is worth now or how it might resolve. For current value you look at the market price, and for potential outcomes you look at the contract terms. This page is general information and not tax advice. As of September 2025 the tax treatment of event contract gains varies by jurisdiction and can change, so confirm the current rules with a qualified professional.
You buy 200 contracts at 30 cents and pay a one dollar fee, for a cost basis of 61 dollars. The position later settles in your favour at one dollar each, paying 200 dollars. Your realised gain is roughly 139 dollars, the proceeds minus the cost basis. This is illustrative and not tax advice.
Illustrative only. Numbers are examples, not a quote or a prediction.
Tracking cost basis keeps your records accurate, but it does not reduce the risk that a position resolves against you and loses money. Stake only what you can afford to lose, never to chase a loss, and never on borrowed money. If it stops feeling like a free choice, step back. In the United States you can call or text the helpline on 1-800-GAMBLER or visit ncpgambling.org.
The total amount you paid to acquire a position, including fees. It is the figure your gain or loss is measured against when you close or settle.
Usually yes. Acquisition fees typically add to the basis and selling fees typically reduce proceeds, though the detail depends on your jurisdiction.
Many systems tax the gain, which is proceeds minus cost basis, so an accurate basis keeps you from overstating or understating what you owe. As of September 2025 rules vary, so verify with a professional.
The rules change fast. Get the changes that affect you, plain and current, not tips.
Independent. Every claim dated and sourced. No platform pays for its place.