Assignment of the Week · Puzzle #7
Would you take this assignment? #7: The thesis broke
The scenario
- Sold $30 put for $0.80, assigned
- Company cut guidance
- Stock now $21, basis $29.20
Sold a $30 put for $0.80 and got assigned. Then the company cut guidance and the stock sits at $21. Basis $29.20. Do you keep wheeling it, or take the loss?
Work it out first (the wheel calculator helps), then open the answer.
Show the answer and the math
Short answer: Paper loss $820 (about 28%). If the business changed for the worse, selling and redeploying is a valid wheel decision.
Worked math
- Paper loss: $2,920 basis − $2,100 value = $820, about 28%.
- Calls at your basis: A $30 call on a $21 stock likely pays pennies. Selling calls near $21 risks locking in the loss if it bounces.
- How long premium takes to repair it: If a reasonable call pays $0.40 a month, $8.20 of loss takes ~20 months of premium, if nothing else goes wrong.
- Redeploying: Selling at $21 frees $2,100 for a stock you'd actually choose today.
The takeaway
Holding a broken stock only to get back to $29.20 is anchoring. Ask the same question you asked before the first put: would I sell a put on this business today? If not, taking the loss and redeploying is part of the wheel, not a failure of 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.