Options: income & assignment

What you will learn

Covered Call

You sell an OTM call against 100 shares you already own. You collect premium today; in exchange, you cap your gain at the strike. Best for stocks you expect to trade sideways or drift up slightly. Common mistake: selling it on a stock you want to keep and being forced to deliver it in a rally.

Cash-Secured Put

You sell a put while setting aside the cash to buy 100 shares at the strike. You collect premium; if the stock falls below, you get assigned and buy 'at a discount' (strike − premium). It is getting paid to wait to buy a stock you want. Mistake: doing it on something you don't actually want to own.

The Wheel

Income cycle: sell cash-secured puts → if assigned, you own the shares → sell covered calls on them → if assigned, you sell them → start over. You generate premium on every loop. Works on solid stocks you don't mind owning; it dies on stocks that crash and never recover.

Assignment & exercise

Exercise is the buyer's right; assignment is the seller's obligation. If you sold an ITM option, you can be 'assigned': you deliver (call) or buy (put) the shares at the strike. American style: assignable any day until expiry; European: only at expiry. You collect premium for taking on that obligation.

Expiration & pin risk

At expiry, an ITM option is auto-exercised and an OTM one expires worthless. The danger is 'pin risk': if the underlying closes right at your strike, you don't know whether you'll be assigned, and you may wake up Monday with an unexpected directional position of 100 shares. Close doubtful positions before Friday's close.

0DTE — zero days to expiry

Options that expire the same day. Gamma is extreme (delta jumps with every tick) and theta evaporates within hours: they are the most sensitive and the most deceptive. Volume exploded because they look like cheap lottery tickets, but without management they are a casino. Real intraday assignment risk on short legs.