Derivatives note, July 27, 2022. How to manage assignment

Remember that we should write covered calls only in our “fun” portfolio. This portfolio should add up to no more than 10% of our market holdings overall. If we lose it entirely, it should make no difference to the way we live.

No one needs a “fun” portfolio; relying on the habits of the Monday Morning Program, investors can do very well without one. However, occasionally, investors can stumble across a situation that is safe and effective. They can take a position in that situation to some extent in the core portfolio.

One of our members with a degree in economics as well as an MBA uses the approach we describe below to manage his covered calls position when assigned, the underlying security is called away from him and he is in cash.

Depending on how this affects his asset allocation, he sees two choices.

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me