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Put Assignment Cost Basis: Strike, Premium and
When a short put is assigned, the strike determines the stock purchase price, while the premium changes the economics of the trade. Keeping those concepts separate makes post-assignment decisions clearer.
What assignment does
Assignment on a short equity put obligates the seller to purchase the underlying shares at the strike price. One standard equity option contract generally corresponds to 100 shares, subject to contract adjustments.
Economic basis
A useful trading measure is strike price minus premium received per share. If a $50 put was sold for $2, the economic purchase price is $48 before fees, commissions and taxes.
Market price can be much lower
The effective basis is not a floor. If the stock is $35 when assigned, the position has a substantial unrealized loss even though the seller collected premium and has a $48 economic basis.
Tax basis may not match a trading spreadsheet
Tax treatment depends on the specific transaction and applicable tax rules. Broker statements may incorporate option premium in ways that differ from a trader's informal economic tracking. Tax questions belong with a qualified tax professional.
Covered calls do not automatically repair basis
After assignment, selling a covered call can generate additional premium, but it also caps upside above the call strike. Selling calls solely to 'get back to break-even' can create poor new trades.
Manage the new stock position on its own merits
Once assigned, ask whether the business, valuation, portfolio concentration and opportunity cost still justify ownership. The original premium is historical cash flow; it should not force the portfolio to hold an unattractive stock indefinitely.
Use the free Options Seller's Risk Checklist
Before selling premium, define the underlying, event risk, assignment plan, portfolio impact and exit rules.
Get the free checklist Explore the AcademyRelated Farland Capital guides
Selling Puts · Delta & Strike Selection · Options Trading Plan