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When is a covered call assignment possible?

There’s always the possibility of early assignment when: Your Covered Call is In-The-Money (ITM). That means the current stock price is above your Covered Call strike price. And when your Covered Call is close to expiration. And when your extrinsic value is very little.

What is a covered call?

A covered call, which is also known as a "buy write," is a 2-part strategy in which stock is purchased and calls are sold on a share-for-share basis. Losses occur in covered calls if the stock price declines below the breakeven point. There is also an opportunity risk if the stock price rises above the effective selling price of the covered call.

What does 'assignment' mean in a covered call trade?

Let's look at the issue from the point of view of both people involved in the trade: the option holder who is long the call option, and the covered call writer who is short the same call option. "Assignment" means the call option you sold short as part of your covered call trade is now being exercised.

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