Getting assigned on a cash-secured put is not a failure—it's simply the next step in the wheel strategy. When you sell a cash-secured put and the stock price falls below your strike price, assignment means you now own 100 shares of stock at your predetermined price. The key to successful wheel strategy execution is knowing exactly how to handle this transition and continue generating premium income.
This article walks through a real assignment on Marvell Technology (MRVL), demonstrating the complete process: logging the assignment transaction, updating your cost basis, and immediately setting up new option positions to keep the income flowing. Whether you're tracking positions manually or using specialized software, understanding this workflow is essential for consistent option selling success.
When your cash-secured put gets assigned, you transition from holding a short put position to owning the underlying stock. This creates an opportunity to sell covered calls on your newly acquired shares while simultaneously selling another cash-secured put at a lower strike price—a strategy known as bilateral trading that accelerates your path back to profitability through dollar cost averaging.
Key Principle: Assignment on a cash-secured put is not a loss—it's the planned continuation of the wheel strategy. By keeping your collected premium and immediately setting up new option positions, you maintain continuous income generation while working to lower your cost basis through strategic position management.
Proper assignment tracking begins with understanding exactly what happened in your brokerage account. When a cash-secured put expires in-the-money, you're obligated to purchase 100 shares per contract at the strike price, regardless of the current market price. In the MRVL example, the $37 put expired with the stock trading at $36.10, triggering automatic assignment.
The assignment process involves two critical components that must be recorded accurately:
Original Put Position:
Assignment Result:
After assignment, your cost basis appears to be $37.00 per share based on the purchase price. However, your true cost basis is lower when accounting for the premium collected. Many brokers don't automatically adjust your cost basis for options premium, making independent tracking essential for accurate profit calculations.
With $99 collected in premium, your effective cost basis drops to approximately $36.01 per share ($3,700 - $99 = $3,601 ÷ 100 shares). This distinction becomes crucial when selecting strike prices for your next covered call—you want to target strikes that generate profit above your true cost basis, not just the purchase price.
Cost Basis Reality Check: While your brokerage shows a $37 cost basis, the $99 premium you collected effectively reduces your basis to $36.01. This is why dedicated cost basis tracking for option sellers is essential—your broker's numbers don't tell the complete story of your true position profitability.
Once you've logged the assignment, immediately shift focus to the next income opportunity. The bilateral trading approach involves simultaneously selling a covered call on your newly acquired shares and selling another cash-secured put at a lower strike price. This two-sided strategy generates premium from both positions while creating multiple paths to profitability.
Covered call selection after assignment requires careful consideration of your cost basis and profit goals. You have two primary approaches:
The conservative approach—and the one recommended for maintaining consistent profitability—is targeting your original purchase price ($37) or higher. This ensures you capture both stock appreciation and option premium, maximizing total return. Only consider selling below your purchase price if you need to exit the position due to fundamental concerns about the underlying company.
The second component of bilateral trading is selling another cash-secured put below your current position. This serves two critical purposes:
In the MRVL example, the $36 at-the-money put offered approximately $115 in premium for the weekly expiration. Since the stock was trading at $36.10, this represents an at-the-money strike with strong premium relative to time. If assigned at $36, the average cost basis across 200 shares would drop to $36.50 per share before accounting for additional premium collected.
Current Position After Assignment:
New Covered Call (Sell to Open):
New Cash-Secured Put (Sell to Open):
Total Weekly Premium Potential: $195 ($80 + $115)
Notice both selected strikes (the $37 call and $36 put) are at-the-money or very close to it. This is the core principle behind "MyAtTheMoneyMachine"—at-the-money options offer optimal premium collection for the time duration involved. While you could sell far out-of-the-money options with lower assignment risk, the premium collected would be significantly reduced.
At-the-money options provide the highest extrinsic value (time value) relative to their probability of assignment. For weekly options on liquid stocks with high option volume like MRVL, this extrinsic value decays rapidly in your favor, allowing you to collect meaningful premium even with just five trading days until expiration.
Order execution technique directly impacts your profitability. Rather than accepting the current market price, professional option sellers strategically price their orders within the bid-ask spread to capture additional value. This technique becomes second nature with practice but can add 5-15% to your premium collection over time.
When viewing an option chain, every strike price displays two critical numbers:
The middle point between these two prices represents fair value based on current market conditions. By placing limit orders at or slightly above the midpoint when selling options, you increase your premium collection without significantly reducing your fill probability.
The MRVL covered call example demonstrates this principle in action. If the $37 strike shows a bid of $0.78 and ask of $0.82, the midpoint is $0.80. Instead of accepting the $0.78 bid price, place your limit order at $0.80. For high-volume options like MRVL weeklies, this order typically fills quickly, netting you an extra $2 per contract.
As a general guideline for weekly options on liquid stocks:
Order Entry Best Practice: Always verify you're receiving a credit when selling options. Before confirming any order, double-check that the "credit" field shows the expected amount. This simple verification prevents costly mistakes like accidentally buying options when you intended to sell them.
The example demonstrates entering orders on Sunday when markets are closed. This is intentional—you can review positions calmly, research strike prices, and place orders that will execute when the market opens Monday morning. This approach removes the pressure of live market movement and allows for more thoughtful decision-making.
For weekly expirations, Sunday evening order entry ensures you're first in the queue Monday morning when option volume surges. If your orders don't fill within the first 30-60 minutes of trading, you can quickly adjust pricing by pennies rather than losing an entire day of time decay waiting to place orders.
Before executing any option trade, examine two critical data points that reveal market liquidity: open interest and daily volume. These indicators tell you how easily you can enter and exit positions at fair prices.
Open interest represents the total number of outstanding option contracts at a specific strike price. Higher open interest indicates an active, liquid market where your orders will fill quickly at competitive prices. For weekly options, look for open interest in the hundreds or thousands at your target strike prices.
In the MRVL example, all selected strikes (the $36 put, $37 call) showed open interest in the hundreds with strong daily volume. This confirms MRVL options are liquid enough for reliable weekly trading, meaning bid-ask spreads remain tight and fills occur quickly even during normal market hours.
A critical risk management decision emerges after assignment: Should you ever sell covered calls below your purchase price? The answer depends entirely on your outlook for the underlying company.
Conservative approach (recommended): Only sell calls at or above your purchase price ($37 in the MRVL example). This ensures any stock appreciation generates profit while you continue collecting premium. Your patience is rewarded as the stock recovers.
Aggressive exit approach: If fundamental analysis reveals deteriorating company prospects (weak earnings, industry disruption, management issues), you might sell calls below your purchase price to exit the position quickly. Accept a small loss on the stock sale but consider it offset by all premium collected throughout the trade cycle.
Exit Strategy Guideline: Only target cost basis adjusted for premiums when you have serious concerns about the underlying company's future. If your fundamental thesis remains intact, maintain discipline by selling calls at or above your purchase price while using cash-secured puts to lower your average cost through dollar cost averaging.
The bilateral trading strategy employed after assignment serves a powerful purpose beyond immediate premium collection—it systematically lowers your average cost basis through intentional dollar cost averaging. Each time you get assigned on a lower-strike cash-secured put, you're effectively buying the dip while collecting premium for doing so.
Consider the MRVL position evolution:
This systematic approach transforms temporary stock price weakness into an advantage. While traditional investors watch their positions decline in value, option sellers continue generating income and methodically reducing their cost basis with every assignment cycle.
What's often called "the wheel strategy" assumes a single revolution: sell puts until assigned, sell calls until assigned, exit. This simplified version misses the power of continuous bilateral trading, especially when stock prices move sideways or decline temporarily.
The continuous wheel approach maintains positions on both sides simultaneously:
This methodology generates income whether the stock rises (covered calls), falls (cash-secured puts), or trades sideways (both expire worthless, repeat next week). The only scenario that challenges this approach is extreme stock price collapse combined with deteriorating fundamentals—which is why stock selection and fundamental analysis remain critical even for option-focused strategies.
The assignment workflow demonstrated in this article highlights a common challenge for option sellers: accurately tracking cost basis across multiple transaction types. Manual spreadsheet tracking becomes error-prone when you're managing assignments, rolled positions, dividend payments, and option premium across multiple tickers simultaneously.
MyATMM was purpose-built to solve this exact problem. The platform automatically:
Real-World Efficiency: What takes multiple spreadsheet cells, formulas, and manual updates in Excel happens automatically in MyATMM. Log your assignment, click to generate new position records, and instantly see your updated cost basis with all premium factored in—exactly what you need to confidently select your next strike prices.
The platform supports the exact workflow demonstrated in this MRVL example: marking positions as assigned, recording stock purchases at assignment prices, and immediately planning your next bilateral trades with full visibility into how they'll impact your cost basis. For traders managing multiple wheel strategy positions across 5, 10, or more tickers, this automation transforms assignment from a tedious administrative task into a quick 2-minute process.
Successfully managing cash-secured put assignments separates consistent option sellers from those who struggle with the strategy. The principles demonstrated through this MRVL trade apply universally across all wheel strategy positions:
The wheel strategy thrives on systematic, repeatable processes. Each assignment is simply the next step in a continuous cycle of premium collection. By maintaining disciplined position management, accurate cost basis tracking, and strategic strike selection, you transform stock assignments from concerning events into profitable opportunities that accelerate your path to consistent income generation.
Options trading involves significant risk and is not suitable for all investors. Past performance does not guarantee future results. Cash-secured puts obligate you to purchase stock at the strike price if assigned, requiring sufficient capital and willingness to own shares potentially below current market prices. Covered calls cap your profit potential on stock appreciation. Assignment can occur at any time before expiration, particularly if options move deep in-the-money.
The strategies discussed in this article are for educational purposes only and should not be considered financial advice. Every trading decision should be made based on your individual financial situation, risk tolerance, investment goals, and time horizon. Always consult with a qualified financial advisor before implementing any options trading strategies.
Dollar cost averaging through options assignments does not guarantee profitability. Stock prices can decline significantly below your cost basis, resulting in substantial unrealized or realized losses. The wheel strategy works best with fundamentally strong companies where you're comfortable holding long-term positions. Never sell puts on stocks you wouldn't want to own or can't afford to purchase.
Stop struggling with spreadsheets. MyATMM automatically tracks assignments, calculates true cost basis with premium adjustments, and manages bilateral positions across all your tickers. See exactly where you stand before every trade decision.
Create Your Free AccountTrack up to 3 tickers free forever. No credit card required.