Obligation
Covered call assignment risk
When a covered call is assigned, the call writer may have to deliver shares at the strike price. That can be acceptable when planned, but painful if the trader wanted to keep the shares through a larger move.
Why assignment matters
Assignment can cap upside, trigger tax considerations, remove shares before a dividend or event, or create a different portfolio exposure than intended. Broker procedures and contract terms matter.
Practical checklist
- Confirm the option style, expiration, strike, and multiplier.
- Decide whether selling shares at the strike is acceptable.
- Review dividend timing and early assignment incentives.
- Know the broker notification and exercise/assignment process.
Primary reading: OIC covered call strategy overview · OIC options pricing overview · FINRA options overview · Investor.gov options overview · OCC options disclosure document