Step 2: Assignment & Owning Shares

When your cash-secured put is assigned, you become the owner of 100 shares at the strike price. This is actually a good outcome in the Wheel Strategy—you've acquired the stock at a discount (strike price minus premium received), and now you can move to Step 3: selling covered calls.

What Happens When Assigned?

Assignment is automatic if the stock price is below your strike at expiration. Your broker will notify you, and you'll see 100 shares appear in your account.

Assignment Process

  1. Stock closes below your put strike at expiration
  2. Broker automatically assigns you 100 shares at the strike price
  3. Cash is debited from your account (strike price × 100 shares)
  4. You now own the stock and can proceed to Step 3

Understanding Your Cost Basis

Your effective cost basis is the strike price minus the premium you received. This is important for calculating profits and setting covered call strikes in Step 3.

Cost Basis Calculation

Cost Basis = Strike Price - Premium Received

Example: Sold $45 put for $1.50. Assigned at $45. Cost basis = $45 - $1.50 = $43.50 per share. You effectively bought the stock at $43.50, even though you paid $45. The premium you collected reduces your cost.

Why Assignment Is Actually Good

In the Traditional Wheel, assignment is part of the plan. Here's why it's beneficial:

  • You Got a Discount: You bought at strike price minus premium, below where you sold the put
  • You Already Collected Income: The premium is yours regardless
  • You Can Now Sell Covered Calls: Owning shares unlocks Step 3 of the Wheel
  • You're in a Profitable Position: If stock recovers, you profit from both the discount and potential appreciation

What If You're NOT Assigned?

If the stock stays above your strike price, the put expires worthless and you keep the premium. This is also a good outcome—you made money without owning the stock.

If Not Assigned

Simply sell another cash-secured put (back to Step 1). You keep collecting premium until you eventually get assigned. The Wheel continues either way—you either collect premium or get assigned and move to covered calls.

Next Step

Now that you own 100 shares, you can sell covered calls to generate more income.

Step 3: Covered Calls →