Home › Guides › Options: strategies & spreads

My credit spread got assigned early. What do I do?

Early assignment hits the leg you sold, never the leg you bought. So this morning you hold a stock position plus one long option. Here is what that is worth and the three ways to close it.

Options guide · 10-minute read · Updated 2026-10-29

What is in your account this morning

Early Assignment only ever hits the option you sold. The one you bought is untouched.

So the spread is gone and two things replaced it:

• A stock position. On a call credit spread you are short 100 shares at the strike you sold, with the cash from that sale in your account. On a put credit spread you own 100 shares at that strike, and the cash has left.
• One long option, still open, still worth something.

That long option is why this is annoying rather than dangerous: it still caps the loss, at a slightly worse number than before. What changed is that the position now carries stock risk overnight, a borrow cost if you are short, and any dividend that passes while you hold it.

New to this? Read early assignment explained first, then come back for the arithmetic.

Why it happened

US stock options are American style: the holder can exercise on any trading day. They almost never do it early, because exercising throws away the time value left in the option. Two things make them do it anyway.

A dividend, on a short call. The common one. When the coming dividend is bigger than the time value left in your short call, the holder gains by exercising the day before the ex-dividend date, collecting the dividend and giving up a few cents of time value. You then owe that dividend, because you were short the shares on the ex-date.

Deep in the money with no time value left. When time value has gone to near zero there is nothing for the holder to give up, so some exercise to free capital or take the stock. Short puts also get assigned early around hard events, like a buyout at a fixed price. Index options are usually European style and cannot be exercised early at all.

Rolling before ex-dividend covers the calendar check that prevents most of this.

The numbers, worked out

(Hypothetical. An illustration, not a trade idea.)

Cobalt Mining trades at $48. Thirty days out you sell a call credit spread:

• Sell the $50 call for $1.40
• Buy the $55 call for $0.40
• Net credit $1.00, so $100 in your account

The spread is $5 wide, so:

• Max gain: $100.
• Max loss: (5 × 100) − 100 = $400.
• Break-even: $50 + $1.00 = $51.00.

Cobalt announces a big contract and runs to $58 with 12 days to go. It also goes ex-dividend tomorrow, paying $0.50 a share. Your short $50 call is worth $8.20 — $8.00 of intrinsic value and $0.20 of time value. The dividend is bigger than that $0.20, so the holder exercises tonight.

This morning your account holds:

• Short 100 shares at $50, so +$5,000 of cash from the sale. At $58 that position shows −$800.
• One long $55 call, worth about $3.40 ($3.00 intrinsic plus $0.40 of time value).
• A $50 dividend owed ($0.50 × 100), because you were short the shares on the ex-date.
• The $100 credit you collected at the start.

The three ways out, each priced

A. Exercise the long call. You buy 100 shares at $55 with it and hand them back to cover the short at $50.

• Shares: sold at $50, bought at $55, so −$500. Credit kept +$100. Dividend owed −$50.
• Total: −$450.

That is $50 worse than the spread's $400 max loss, and the $50 is exactly the dividend. Exercising also throws away the $0.40 of time value still in the long call, which makes it the worst of the three.

B. Buy the shares in the market and sell the long call. Two orders, same result, better price.

• Buy 100 at $58 to close the short opened at $50: −$800. Sell the $55 call for $3.40: +$340.
• Credit kept +$100. Dividend owed −$50.
• Total: −$410.

Check it the other way: B beats A by exactly $40, the $0.40 of time value A gave away. The two agree.

C. Hold it. Short 100 shares with a $55 call above them is the same shape as the spread, built from different pieces. The cap still works.

• Cobalt to $65: shares −$1,500, the call's $10.00 of intrinsic value +$1,000, credit +$100, dividend −$50. Total −$450. Capped.
• Cobalt back to $50: shares break even, the $55 call is worth about $0.30 so +$30, credit +$100, dividend −$50. Total +$80.

So C is the only choice that can still finish green. It is also the one that charges rent: short shares are borrowed, so there is a borrow fee, another ex-dividend date means another dividend owed, and the position eats buying power. If the account gets tight your broker can buy the shares back for you, at a price you did not choose.

Which one most sellers take

Most take B. It captures the time value left in the long call, closes everything today, and needs no margin babysitting. It costs one extra order.

A is for when the long call has no time value left, deep in the money a day or two from expiry.

C is for when you genuinely think the stock is coming back and you have the buying power and the dividend calendar to hold it. Be honest about which of those you are missing.

The checks that prevent this

• Look up the ex-dividend date before you sell any call spread. If one falls inside your expiry, write it on the trade.
• Watch the time value in your short call, not the share price. When it drops below the coming dividend, you are next to be assigned. Close or roll before the ex-date.
• Close spreads whose short leg goes deep in the money. A short leg you closed cannot be assigned.
• Keep buying power for a stock position you did not plan. Short 100 shares at $58 is a $5,800 position, not the $400 you had at risk.

One account note. Short stock needs a margin account, so a Canadian TFSA or RRSP cannot hold it, and most brokers will not approve call credit spreads in a registered account for that reason. Multi-leg spreads also sit a level above the covered calls and cash-secured puts of the wheel strategy on every approval ladder. Check what your account may hold before you need the answer in a hurry.

Questions