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When Selling Covered Calls, What's The Best Strategy To Limit Chances Of Assignment?

Updated: Jan 8, 2019

If you're selling covered calls, your ideal scenario is for the stock to keep moving up, yet not too much so as to have your stock called away from you.


Collecting the call premium helps to protect the downside a bit on your long stock position, but you also want the strike price to be far enough out-of-the-money (OTM) so you don’t get assigned and have your stock called away.


Of course there’s no guarantee that you can find that sweet spot, so you’ll have to figure out a way to pick a strike that’s least likely to move in-the-money.


Try to use the stock’s volatility to estimate a range it’s been trading in and use a probability calculator like this one to help you see what your chances are of the stock getting to that point.


You can tweak the inputs of the probability calculator to give you different scenarios.


Bottom-line, if you do get the stock called away from you, make sure it’s at a price that you’ll be happy with - especially if it’s for a nice gain. Sometimes taking profits is a good thing.

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