Covered Call Assignment

Assignment is when the call buyer exercises their option and your shares are called away.

When Assignment Happens

At Expiration

  • Option is ITM (above strike)
  • Automatic exercise if $0.01+ ITM
  • Shares transferred at strike price

    • Early Assignment

  • Can happen anytime with American options
  • More likely when:
    • - Call is deep ITM - Approaching ex-dividend date - Near expiration

    What Happens Mechanically

  • Option exercised by call buyer
  • You receive strike price × 100
  • Shares removed from account
  • Option position closes

    • Managing Assignment

    If You Want to Keep Shares

  • Roll before expiration (buy to close, sell new call)
  • Monitor as stock approaches strike
  • Roll at 50% profit when possible

    • If Assignment is Okay

  • Let it happen
  • Collect strike price + premium
  • Redeploy capital via cash secured puts

    • Tax Implications

    When assigned:

  • Sale price = Strike price + premium received
  • Cost basis = Original purchase price
  • Gain/loss depends on holding period