Question 1

What happens if my call is assigned?

Accepted Answer

You sell 100 shares at the strike price. This can happen anytime with American options, but usually at expiration or near ex-dividend. If assigned early, you keep all premium. Ensure you're okay selling at the strike before writing the call.

Question 2

Can I avoid assignment?

Accepted Answer

You can 'roll' the option - buy it back and sell another at higher strike or later expiration. This costs money but preserves your stock position. The deeper in-the-money, the more expensive to roll. Assignment isn't necessarily bad if strike provides acceptable return.

Question 3

How do dividends affect covered calls?

Accepted Answer

If a stock pays dividends and the call is in-the-money, early assignment is more likely before ex-dividend date. The call holder may exercise to capture the dividend. Factor dividend timing into strike selection and return calculations.

Question 4

What's an ideal stock for covered calls?

Accepted Answer

Moderately volatile stocks with premium value, liquid options markets, stocks you're comfortable owning long-term, and names with slight upward bias. Avoid very volatile stocks (high assignment risk) or very stable stocks (low premiums).

Question 5

Should I write covered calls on all my stocks?

Accepted Answer

Not necessarily. Avoid on stocks you expect significant upside - you'll cap your gains. Works best for income generation on holdings you're willing to sell at the strike. Consider tax implications of potential assignment on long-held shares.

Question 6

What expiration should I choose?

Accepted Answer

Shorter expirations (30-45 days) offer higher annualized returns and faster theta decay. Longer expirations provide more premium but tie up capital. Weekly options for active traders, monthly for most covered call writers.

Covered Call Calculator

Important Financial Disclaimer

Stock Position

Call Option Details

Return Scenarios

Position Analysis

Price Scenarios at Expiration

Help us improve!

Related Calculators

Option Profit

Options Greeks

Dividend Yield