Assignment of the Week · Puzzle #5
Would you take this assignment? #5: Two strikes, same stock
The scenario
- 30 days to expiry
- $45 put: $0.60, delta 0.20
- $48 put: $1.40, delta 0.40
30 days out. $45 put: $0.60, delta 0.20. $48 put: $1.40, delta 0.40. Which do you sell, and what's the trade-off?
Work it out first (the wheel calculator helps), then open the answer.
Show the answer and the math
Short answer: $45: about 16% annualized, ~20% assignment odds. $48: about 35% annualized, ~40% odds. More premium buys more assignment risk.
Worked math
- $45 put: $60 ÷ $4,500 = 1.33% for 30 days ≈ 16.2% annualized. Breakeven $44.40.
- $48 put: $140 ÷ $4,800 = 2.92% for 30 days ≈ 35.5% annualized. Breakeven $46.60.
- Assignment odds (rough): Delta is a rough stand-in for the chance of finishing in the money: about 20% vs about 40%.
- What the extra premium buys: $80 more premium for twice the assignment odds and a breakeven $2.20 higher.
The takeaway
There's no free lunch between strikes. If you want the shares, the $48 put pays you more to wait for them. If you mainly want income and would rather not own the stock this month, the $45 put fits. Pick based on which outcome you prefer, then size it.
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.