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.
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.
— 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.
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