Option Assignment: Play Both Sides with Covered Calls and Cash-Secured Puts

Introduction: The Power of Assignment

Cash-secured put assignment represents one of the most significant milestones in the continuous wheel strategy because it unlocks the ability to play both sides of the market simultaneously. Before assignment, you collect premium by selling cash-secured puts and waiting to either keep the premium at expiration or get assigned shares. After assignment, you suddenly gain access to a second income stream by selling covered calls against your newly acquired shares while continuing to sell additional cash-secured puts at the same time.

This article follows a real-world assignment on Bath & Body Works (BBWI) where a cash-secured put at the $47 strike expired in-the-money, resulting in the purchase of 100 shares at that strike price. With shares now in hand, the strategy demonstrates how to establish both a covered call at cost basis to protect against capital loss and an at-the-money cash-secured put to continue building the position, creating a situation where one side is mathematically guaranteed to win because stock price can only move in one direction.

You will learn the complete workflow for tracking assignment transactions in MyATMM, how to calculate cost basis with premium to understand true position profitability, the strategic advantage of playing both sides simultaneously, and how to select appropriate strikes for both covered calls and cash-secured puts that maximize income while managing risk effectively.

Cash-Secured Put Assignment: Understanding the Transaction

The assignment occurred on a cash-secured put originally sold on February 26th for $1.78 premium per share with a $47 strike price expiring March 1st. By reviewing the ThinkOrSwim account statement, you can trace the complete lifecycle of this position from initial sale through assignment weekend.

Transaction Timeline

The detailed transaction history reveals the precise sequence of events:

Why Assignment Occurred

Assignment happens automatically when a short put option expires in-the-money, meaning the stock price sits below the strike price at expiration. In this case, BBWI closed at $45.68 on Friday March 1st, which falls $1.32 below the $47 strike price. This in-the-money status triggers automatic exercise by the option holder, who sells their shares to you at $47 even though market price only reached $45.68.

From the put seller's perspective, this assignment represents acceptance of the original obligation. When you sold the cash-secured put, you agreed to purchase 100 shares at $47 if the stock price dropped below that level. The $178 premium collected provides some cushion against the higher purchase price, effectively reducing your cost basis from $47.00 to $45.22 when you factor in the premium income.

Assignment Notification in ThinkOrSwim

The brokerage statement clearly shows the $4,700 assignment transaction, which represents 100 shares multiplied by the $47 strike price. ThinkOrSwim processes assignment over the weekend following expiration Friday, and the shares appear in your account when you check positions on Monday morning. The account now shows 100 shares of BBWI with a purchase price of $47 per share, ready for covered call sales.

Tracking Assignment in MyATMM: Complete Workflow

Properly recording the assignment transaction in MyATMM requires adding both the original put sale and the subsequent assignment to maintain accurate cost basis tracking. The platform provides a systematic workflow that guides you through this multi-step process.

Step 1: Record the Original Cash-Secured Put

Navigate to the cost basis page and filter to BBWI. Since this represents a new position with no previous transactions, the stocks row shows zero shares and the transaction history appears empty. Click to add a new put transaction:

• Start Date: February 26th (when the order filled)
• Action: Sell to open
• Option Type: Put
• Contracts: 1
• Expiration: March 1st
• Strike Price: $47
• Premium: $1.78 per share

Click Save to add this transaction to the puts section, which creates a temporary record showing the proposed transaction. This temporary record helps you visualize the transaction before committing it to permanent history. The system shows that you would receive $178 in premium from this one contract.

Step 2: Add Commission and Fees

Review your brokerage statement to identify the exact commission and fees charged for this transaction. ThinkOrSwim charged $0.65 commission and $0.02 regulatory fees for this trade. Enter these amounts in the appropriate fields:

• Commission: $0.65
• Fees: $0.02

Click the helper button to auto-calculate the net credit, which subtracts commission and fees from the premium to show the actual amount deposited to your account. The system generates a descriptive text showing: "Collected $176.33 credit from selling 1 contract" (which equals $178 premium minus $0.65 commission minus $0.02 fees).

Step 3: Save to Permanent Transaction History

After verifying all details, click Save to move this transaction from the temporary proposed record into the permanent transaction history. This step is critical because the permanent history feeds all cost basis calculations and summary statistics. The transaction now appears in the history section with all details preserved for future reference and tax reporting.

Step 4: Record the Assignment

With the put transaction recorded, now document the assignment that occurred when the put expired in-the-money. In the puts section where the cash-secured put appears, locate the Result dropdown and select "Assigned." This changes the interface to show assignment-specific fields:

• Assignment Date: March 2nd (Saturday following expiration Friday)
• Action: Buy to open (you are buying shares)
• Assignment Type: Stock
• Shares: 100
• Assign Price: $47 per share
• Total: $4,700 (calculated automatically)

Click Submit to process the assignment. The system performs several automated actions: adds the shares to the stocks position row, removes the put from the active positions section since it no longer exists, creates temporary proposed records for future transactions, and prepares to add the stock purchase to permanent transaction history.

Step 5: Record Stock Purchase Transaction

The assignment generates a stock purchase that must be added to permanent transaction history. The temporary records section now shows a proposed stock purchase for 100 shares at $47. Since ThinkOrSwim charges no commission or fees for stock transactions, leave those fields at zero and click the helper button to populate the description showing: "Stock purchase $4,700 debit for 100 shares at $47.00."

Click Save to move this stock purchase into permanent transaction history. The position summary now updates to show 100 shares owned with all relevant cost basis information.

Understanding Position Profitability: Cost Basis with Premium

After recording all transactions, the MyATMM position summary reveals the true financial picture for the BBWI position. These metrics provide the foundation for all future decision making about covered call strikes, additional cash-secured put sales, and position management strategies.

Key Position Metrics

The True Profitability Picture

The position summary reveals a crucial insight: while the shares show a $132 unrealized loss based on the purchase price versus current market value, the overall position actually sits $329 in the green when you include the $461 in total credits collected from all option premium. This $461 figure includes not just the $176 from this most recent put assignment, but also premium collected from previous cash-secured put sales on BBWI that expired worthless before this assignment occurred.

The cost basis with premium of $42.38 provides the most meaningful number for decision making. This adjusted cost basis shows that after factoring in all premium collected, you effectively paid $42.38 per share even though the assignment occurred at $47. With the current stock price at $45.68, you sit $3.30 above your true cost basis, meaning the position could withstand a $3.30 per share decline before reaching breakeven.

Exit Option Analysis

The demonstration makes an important observation about position flexibility. If you sold all 100 shares immediately at the current market price of $45.68, you would realize:

• Sale Proceeds: $4,568 (100 shares × $45.68)
• Purchase Cost: $4,700
• Loss on Shares: $132
• Premium Collected: $461
• Net Profit: $329 ($461 - $132)

This analysis proves that you could exit the entire position right now with a $329 profit despite the stock trading below your purchase price. This exit option exists at any time, providing complete control over the position and eliminating the stress that comes from being "stuck" in a losing stock position.

Playing Both Sides: The Continuous Wheel Advantage

With shares now owned following assignment, the strategy enters its most powerful phase: playing both sides simultaneously by selling covered calls on the owned shares while also selling cash-secured puts to potentially acquire additional shares. This bilateral approach creates a mathematical certainty that one side will profit each week because stock price can only move in one direction.

Why Both Sides Work

The logic behind playing both sides reveals elegant simplicity:

• If stock price rises: The covered call may get assigned, generating profit from selling shares above cost basis plus all premium collected. The cash-secured put expires worthless, allowing you to keep that premium as pure profit.
• If stock price falls: The covered call expires worthless, allowing you to keep that premium and continue owning shares for future covered call sales. The cash-secured put may get assigned, purchasing additional shares at a lower price that reduces your average cost basis through dollar cost averaging.
• If stock price stays flat: Both options expire worthless, and you keep both premiums as profit while maintaining your current position size.

This three-way win scenario demonstrates why the continuous wheel strategy generates consistent income regardless of market direction. No matter which way the stock moves, at least one position profits, and in the flat price scenario, both positions profit simultaneously.

Capital Commitment Consideration

The demonstration acknowledges the increased capital commitment required when playing both sides. Selling a cash-secured put requires $4,700 in collateral (if using the $47 strike again), which doubles the total capital committed to this single ticker from $4,700 to $9,400. This doubled capital requirement means your account must have sufficient buying power to support both positions simultaneously.

However, this capital doubling comes with significant benefits. You collect two premiums each week instead of one, at least one position is guaranteed to win, and assignment on the put side lowers your average cost basis through dollar cost averaging. For traders who believe in the underlying company long-term and want to build larger positions, this capital commitment serves the strategic goal of accumulating shares at progressively better prices.

Covered Call Selection: Protecting Cost Basis

After understanding the bilateral strategy benefits, the first position to establish involves selling a covered call on the 100 owned shares. The key decision centers on selecting a strike price that balances premium collection with protection against capital loss if assignment occurs.

Cost Basis as Strike Selection Guide

The demonstration references the cost basis display in the upper right corner of ThinkOrSwim, which shows the current cost basis of $47.00 per share. This number provides the critical threshold for covered call strike selection because selling a call at $47 or higher ensures that assignment would result in at least breaking even on the share purchase before considering premium collected.

Looking at the March 8th expiration (this Friday, one week away), the option chain reveals the premium available at various strikes:

The $47 Strike Decision

The analysis concludes that the $47 strike at-the-money provides the optimal balance. Collecting 50 cents premium represents approximately 1% return on the shares for one week, which exceeds typical weekly targets for covered calls. More importantly, the $47 strike matches the cost basis, meaning assignment would create no capital loss on the shares.

The 50 cent premium from this trade represents "pure profit" in the sense that even if assignment occurs, you exit the position at exactly your purchase price plus the 50 cents per share collected. This downside protection matters especially early in the position lifecycle when you have not yet collected enough premium to fully cushion against capital losses.

Order Execution Strategy

The bid-ask spread shows 50 cents bid and 60 cents ask, creating a 10-cent spread. Splitting this spread suggests going up 5 cents to 55 cents for the limit price, which provides a middle ground that should execute the following morning while capturing an extra nickel per share compared to accepting the bid immediately.

The order workflow involves:

1. Left-click on the 50 cent bid in the call side of the $47 strike row
2. Adjust the limit price up to 55 cents (splitting the 10-cent spread)
3. Right-click on the order row and select "Confirm and Send"
4. Review the projected credit of $54.35 after commissions
5. Click Send to queue the order for Monday market open

This order queues overnight and attempts to execute when the market opens Monday morning. If market conditions change significantly, the order may not fill, requiring adjustment to the limit price or strike selection on Monday.

Cash-Secured Put Selection: At-The-Money Strategy

With the covered call order queued, attention turns to selling a cash-secured put to play the other side of the market. The strategy favors at-the-money strikes for cash-secured puts because they offer maximum premium while providing the best probability of assignment if the goal involves building a larger position through dollar cost averaging.

Current Price as Strike Guide

The current stock price trades at $45.68, which rounds to the $46 strike for practical purposes. However, examining the March 8th expiration reveals that the $47 strike offers the highest premium at 60 cents, making it the at-the-money choice despite the stock trading slightly below that level.

Before committing to this week's expiration, the demonstration performs due diligence by checking premium movement over subsequent weeks to ensure no unusual jumps occur that would indicate better value by extending the expiration:

The steady 30-35 cent increases per week indicate normal time decay without unusual jumps, confirming that this week's expiration offers fair value without compelling reason to extend the duration. The 60 cent premium for one week represents solid income for the at-the-money position.

The Wide Spread Challenge

Clicking on the 60 cent bid in the put side reveals a significant challenge: the spread shows 60 cents bid and 85 cents ask, creating an unusually wide 25-cent spread. This wide spread indicates lower liquidity at this strike or temporary market conditions that create uncertainty about fair value.

Splitting a 25-cent spread suggests going up about 12 cents to approximately 72 cents for the limit price. However, the demonstration acknowledges this might not fill immediately and may require monitoring Monday morning to adjust the price based on actual market conditions when the bell rings.

Order Placement Process

Despite the wide spread concern, the trader places the order following this workflow:

1. Left-click on the 60 cent bid in the put side of the $47 strike row
2. Adjust the limit price to 72 cents (splitting the 25-cent spread)
3. Right-click on the order row and select "Confirm and Send"
4. Review the projected credit showing approximately $71 after commissions
5. Click Send to queue the order for Monday morning

The trader notes the need to check this order Monday morning because the wide spread makes execution less certain than the covered call order. If the order has not filled by mid-morning, adjustment to the limit price or consideration of different strikes may be necessary to achieve execution.

Complete Assignment Workflow: Step-by-Step Summary

Managing assignment and establishing bilateral positions involves a systematic workflow that ensures accurate tracking and optimal position management. This complete process summary provides a reference for handling future assignments on any ticker.

Assignment Weekend Workflow

1. Check Account Statement: Review brokerage activity to identify assignment notifications and verify purchase details including date, price, and fees
2. Navigate to MyATMM: Open the cost basis page and filter to the assigned ticker
3. Record Original Put Sale: Enter the cash-secured put transaction with date, strike, expiration, premium, commissions, and fees
4. Save Put Transaction: Click Save to move the put to the active positions section
5. Record Assignment: Select "Assigned" result on the put, enter assignment date, and specify stock purchase details
6. Submit Assignment: Click Submit to add shares to the stocks row and remove the expired put
7. Save Stock Purchase: Add the stock purchase to permanent transaction history with no commissions/fees for stock trades
8. Verify Position Summary: Review updated cost basis, unrealized loss, total credits, and cost basis with premium calculations

Position Establishment Workflow

1. Review Cost Basis: Check both standard cost basis and cost basis with premium to understand true position profitability and protection levels
2. Analyze Covered Call Strikes: Compare premium at strikes above, at, and below cost basis, prioritizing strikes at or above cost basis early in the position
3. Select Covered Call Strike: Choose the strike offering approximately 1% weekly premium while protecting against capital loss on assignment
4. Place Covered Call Order: Split the spread, right-click to confirm and send, queue the order for next market open
5. Analyze Cash-Secured Put Strikes: Identify the at-the-money strike based on current stock price and evaluate premium across multiple expirations
6. Select Put Strike: Choose at-the-money or slightly out-of-the-money strike offering acceptable premium for one week
7. Place Put Order: Split the spread carefully if wide, acknowledge potential need for adjustment, queue order for next open
8. Monitor Execution: Check both orders after market open, adjust any orders that did not fill due to market condition changes
9. Record Executed Transactions: Add both transactions to MyATMM once filled to maintain accurate tracking

Key Success Factors

Successfully managing the assignment process and establishing bilateral positions requires attention to these critical factors:

• Accurate Transaction Recording: Never skip recording premium collected or stock purchases because missing transactions distort cost basis calculations
• Cost Basis Awareness: Always know both your standard cost basis and cost basis with premium before selecting strikes
• Capital Availability: Ensure sufficient buying power exists to support both covered call shares and cash-secured put collateral simultaneously
• Spread Analysis: Take time to split spreads for better fills, but recognize wide spreads may require order adjustment
• Order Monitoring: Check queued orders after market open to verify execution and adjust non-filled orders promptly
• Position Summary Review: Regularly verify that MyATMM calculations match your understanding of position profitability

Key Takeaways: Assignment and Bilateral Trading

Cash-secured put assignment transforms the wheel strategy from single-sided premium collection into a bilateral income generation system that guarantees profitable outcomes regardless of market direction. Understanding how to manage assignment properly and establish both sides of the position creates consistent weekly income with mathematical certainty.

Assignment Management Principles

• Assignment occurs automatically when short puts expire in-the-money, requiring no action beyond accepting the share purchase
• Record both the original put sale and the subsequent assignment in MyATMM to maintain accurate cost basis tracking
• Premium collected on the assigned put reduces effective cost basis below the strike price, creating cushion against unrealized losses
• Position summary showing cost basis with premium reveals true profitability including all income collected
• You maintain complete control with the ability to exit anytime by selling shares and realizing the net position profit

Bilateral Strategy Advantages

• Playing both sides guarantees at least one winning position each week because stock price can only move in one direction
• Covered calls at cost basis protect against capital loss while collecting premium on shares owned
• Cash-secured puts at-the-money maximize premium and enable dollar cost averaging through subsequent assignments
• Flat stock price creates dual wins with both options expiring worthless and all premium kept as profit
• Increased capital commitment doubles income potential while building larger positions in quality companies

Strike Selection Strategy

• Select covered call strikes at or above cost basis early in positions to protect against capital losses
• Target approximately 1% weekly premium on covered calls, accepting lower premium for downside protection
• Choose at-the-money strikes for cash-secured puts to maximize premium collection and assignment probability
• Compare premium across multiple expirations to ensure current week offers fair value without unusual jumps
• Split spreads on all orders to improve fill prices while maintaining reasonable execution probability

The Path Forward

After establishing both the covered call and cash-secured put positions, the strategy enters autopilot mode. The options either expire worthless for pure premium profit, or assignment occurs creating new opportunities to continue the cycle. Each week you collect premium on one or both sides, gradually building total credits that provide larger and larger cushion against unrealized losses on shares.

The systematic tracking in MyATMM ensures you always understand your true position profitability, enabling confident decision making about when to take profits, when to add more contracts, and when to let positions run. This confidence comes from accurate cost basis with premium calculations that show the complete financial picture rather than the misleading standard cost basis that brokerages report.