Assignment of the Week · Puzzle #3
Would you take this assignment? #3: Which call after assignment?
The scenario
- Assigned at $50, basis $48.80
- Stock now $45
- $45 call $1.50 vs $49 call $0.20
Assigned at $50 after a $1.20 put. Basis $48.80. Stock now $45. The $45 call pays $1.50; the $49 call pays $0.20. If called away, what do you make or lose on each?
Work it out first (the wheel calculator helps), then open the answer.
Show the answer and the math
Short answer: $45 call: −$230 if called. $49 call: +$40 if called. The bigger premium locks in a loss.
Worked math
- Cost basis: $50 − $1.20 = $48.80.
- $45 call, called away: $45 + $1.50 − $48.80 = −$2.30 per share, a $230 locked-in loss.
- $49 call, called away: $49 + $0.20 − $48.80 = +$0.40 per share, a $40 gain.
- If neither gets called: You keep $150 vs $20 of premium and still hold the shares. The $45 call's premium only "wins" if the stock stays below $45.
The takeaway
After assignment, the strike you choose decides whether the wheel can close at a profit. Selling below your basis turns a paper loss into a real one if the stock bounces. A small premium at or above basis is slow, but it keeps the cycle intact. If no call at or above basis pays anything worth having, waiting a week or two for a bounce is also a choice.
Run your own numbers, then read the full cycle
Plug any put or call into the free, no-signup wheel calculator to see return on capital, annualized return and breakeven side by side.
The whole cycle (cash-secured put, assignment, covered call, and what to do when it goes wrong) is laid out step by step in Spin the Wheel, Cash the Checks by Logan Sterling (Kindle, $6.99, or free on Kindle Unlimited).
Hypothetical numbers for teaching, not a trade recommendation. Educational only, not financial advice. Options involve risk. Selling options can result in substantial losses, and no particular result or income is guaranteed. See the full disclaimer.