Lesson

Covered Call Assignment | Options Educator

Plan covered-call income around assignment, dividends, taxes, and the opportunity cost of capped upside.

In this lesson

Pricing the sale

  • Effective sale price = strike + premium. Work it out before you sell the call.
  • The premium lowers your breakeven by its own size and no more.
  • Above the strike a covered call earns nothing more: that upside is sold.

Early assignment

  • Early exercise throws away time value, so it is rare except just before an ex-dividend date.
  • Expect early assignment when the dividend is larger than the call's remaining time value.
  • Assigned before the ex-dividend date, you do not receive the dividend.

Your three choices

  • Accept, close or roll: each has a price you can compute today.
  • Buying back an in-the-money call pays for its time value as well as its intrinsic value.
  • A roll raises the cap and extends the stock risk. It is not a free escape.

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