"How Do I Keep My Covered Call Stock From Assignment?"

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"How Do I Keep My Covered Call Stock From Assignment?"

"I sold 6 $31 June calls on X company stock and the stock has surged to $39. Is there anything I can do optionwise to keep X shares besides buying back the 6 $31 june calls? Thanks for your help"
- Asked By Geoffrey L. Jenkins on 11 June 2009

Answered by Mr. OppiE

Hi Geoffrey,

I supposed you executed a Covered Call on X shares and have allowed the short Call Options to get deep in the money, right?

In this case, there is nothing more you can do optionswise to keep the stocks other than Buy To Close the short call options. However, if this is a Deep In The Money Covered Call you are doing, then being in the money is the purpose of the position. In which case, all you have to do is to close the short call options during the final moments of Expiration Friday will do.

If this is a regular Covered Call options trading strategy you did on X by writing the out of the money call options, then there are really one of two things that can happen when the call options get in the money. 1, you still think the stock can go up and wants to keep it for the long term, in this case, buy to close the call options before expiration. 2, if you think it has gone up far enough and chasing it at this point makes no sense, then let the stock go into assignment for the predetermined assigned return.


In conclusion, a lot of options trading beginners buy stocks with a lot of fear and wish to use a Covered Call to hedge against downside risk only to regret it when the stock really moves strongly. If you only want protection on a growth stock you intend to hold for a long period of time, a Married Put would serve better.