I believe the downhill trend will continue and want to pick up some stocks and collect higher premiums at the same time. I was thinking of 110 CSPs exp Dec25 or Jan25, what would be the probability of assignement if the stock goes below strike next week even though my exp would be in several months?
Posted by Easy-Tangerine3293
5 Comments
Assignment is always a risk with CSPs. If NVDA dips below 110 next week and stays there, you could get assigned even months before expiration. It’s all about whether the option buyer wants to exercise.
Want to understand options assignment risk better? Check out [Investopedia’s article on assignment](https://www.investopedia.com/terms/a/assignment.asp).
It is uncommon for buyers of options to execute before expiration. However, in extreme market situations it may happen. Think about NVDA drop to 70 and the buyer needs money. They could execute and force you to buy at 110, while they buy from the market at 70.
It’s exceedingly unlikely that you would get assigned on a contract that still has extrinsic value.
Unlikely but u will lose money on paper (unrealized loss) as the put value would increase if the stock dropped more
Anecdote: I’m currently holding the October 115 CSP and rode it all the way down to around 100 two weeks ago. Didn’t get assigned. YMMV.