Assigned on a put. Now what?
The wheel, step by step
You sold a put, the stock fell through it, and now you own 100 shares. The next call you sell decides whether you wait for a recovery or lock in the loss.
Sell calls at or above your adjusted basis: the strike less every premium collected. If that call pays almost nothing, go further out in time, not lower in strike. Go below basis only when you have decided you want out.
Calls at your basis
Best for
A stock you still want to own, after a dip you expect to recover.
What you get
No locked loss: if called, you exit at break-even or better. Each call lowers the basis while you wait.
Calls below basis
Best for
Getting out faster when your view on the stock has changed.
What you get
More premium now, but if the shares are called away you lock in a loss: the gap to basis less the premium.
Side by side
| Calls at your basis | Calls below basis | |
|---|---|---|
| Strike | At or above your adjusted basis | Below it, about 0.30 Δ |
| Premium | Small when the stock is well below basis | Larger |
| If called away | Break-even or a profit | Locks in a loss |
| If the stock keeps falling | You hold the shares; each premium lowers the basis | The same, a little faster |
| Time to get out | Can be long | Shorter |
| Fits | You still like the stock | You want out of it |
Keeping track of the basis
- Adjusted basis = the put strike − the put's premium − every call premium since.
- Example: assigned at $100 after a $2 put, then a $0.50 call: basis $97.50. A call at $97.50 or higher cannot lock in a loss.
When the basis call pays too little
- Go further out in time at the same strike before going lower in strike.
- Or skip a cycle: holding the shares with no call is better than selling one you would regret.
Payoff sketches are at expiry on a $100 stock, for shape only. Education, not advice: disclaimer.