You Got Assigned. Now What?

The Wheel. Step 1: breathe. Step 2: sell the right call.

Most people think the wheel goes wrong when the put gets assigned.

It doesn't. That's the part where you get paid to buy a stock you wanted anyway. Where it actually goes wrong is the next trade: the covered call.

Here's a simple one. Say you sold a $50 put for $1.00 and the stock closed at $47 on expiry. You now own 100 shares at $50, but your real cost is $49 because you kept the premium.

Now you've got two choices.

The Right Call

Sell the $51 call for $0.40. If the stock bounces back over $51, your shares get called away and you've made $2.40 a share on the whole campaign. That's $1 on the stock, $1 from the put and $0.40 from the call, or $240 on about $4,900 of capital. If it doesn't bounce, you keep the shares and your cost drops to $48.60. Either way you're fine.

The Trap

Sell the $47 call because it pays $1.50. Feels better, right? Bigger check. But if it gets called away, you sell at $47, which is $2 below your cost. The $1.50 doesn't cover it. You just locked in a loss to collect a bigger premium.

I spent 15 years as a market maker watching people make that second trade. They chase the premium and forget what they paid for the stock.

How I Run It

That's why I only wheel stocks I actually want to own. If I get assigned, I'm happy holding. I sell calls above my cost, I keep the tenor short, and I roll when I need to defend.

And in the Trader63 room, the whole campaign lives on one line in the trade tracker: the put, the shares, every call, every roll, all netted together. You see what the trade really made, not just the last leg.

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What to put on your sticky note

Assignment is the plan working. Know your real cost after the put premium, and sell calls above it. A bigger premium below your cost just locks in a loss.

If you want to watch me run the wheel every week, live, with my actual trades, that's what Trader63 is for.

Join Trader63 →

— Hans

Examples are illustrative, not a recommendation. Options carry risk: a cash-secured put can leave you owning shares that keep falling, and a covered call caps your upside. Nothing here is individual investment advice.