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Stocks & Commodities V. 38:06 (16–20): Dividends And The Risk Of Early Option Assignment by James Leahy

Stocks & Commodities V. 38:06 (16–20): Dividends And The Risk Of Early Option Assignment by James Leahy

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Dividends And The Risk Of Early Option Assignment by James Leahy

Selling calls on stocks always presents a risk of early assignment when the calls are in-the-money. Stocks that have dividends present an even greater assignment risk when they are in-the-money and when the extrinsic value is low. Here is what you should know.

Selling call options on stocks you own (called covered calls) is a bullish strategy for reducing the cost basis of the stock. This is accomplished by selling out-of-the-money calls that expire weeks or months in the future, collecting the option premium and then rolling the calls out to farther months, and possibly a different strike when the current options get near expiration ...
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