Option Assignment Procedures: How soon will Covered Call write be exercised after strike price reached
I own XOM stock long and want to write a covered call with an out of the money strike price with an expiration date two years out. If the strike price is reached in, say, two months, am I assured that the option will be assigned?
My concern is that if it isn't, and XOM continues to climb than I won't be able to buy XOM immediately again after the strike price is reached and will have to pay considerably more per share to get back into it.
Comment on "How soon will Covered Call write be exercised after strike price reached"TSO Reply:
Hi Bill. Unfortunately, no one is able to know when an In The Money (ITM)
Option will be assigned. ITM options can be assigned at any time by the buyer or long holder prior to the expiration date (in your case, 2 years).
What we do know is that all options with at least $0.01 ITM will be auto-exercise upon expiration date by your broker. This is automatic and no action is required on your part.
Every option strategies has its risk and reward. In this case, your reward on XOM will be capped at the strike price and you risk losing the stock or buying it back at a higher cost.
So consider and accept all risks & rewards of a strategy before you put your hard earned money into it. Make adjustments to your strategy if necessary.