Early assignment check: will your covered call be exercised for the dividend?
A covered call can be exercised early when a dividend is coming. Enter the stock price, strike, call price and dividend — see the time value left, and whether early assignment is likely.
How it works: a call's price has two parts. Intrinsic value = stock price − strike (zero if the stock is below the strike). Time value = call price − intrinsic value. Whoever owns the call can exercise it the day before the ex-dividend date to collect the dividend. Doing that throws away the time value. So if the time value left is less than the dividend, exercising pays, and early assignment becomes likely. Fees left out; this only matters when the ex-dividend date comes before the call expires.
What you lose when it happens
The default numbers are a hypothetical XYZ covered call (an illustration, not a trade idea): shares at 52, a 50-strike call worth 2.15, a 0.40 dividend. The call has 0.15 of time value — less than the dividend — so the owner of the call gains by exercising. Your shares go at 50 before the ex-dividend date and the 0.40 a share goes to whoever holds them now. If you paid more than 50 for the shares, the call-away is a loss on the shares as well, and the premium you kept is all that offsets it. That is the trade-off the covered call always carries: you gave up everything above the strike, including the dividend, for the premium.
What to do with the flag
It is a check, not a prediction. Assignment is the other side's choice, and on some days the math says "likely" and nothing happens. If the flag is on and you want the dividend, you can buy the call back before the ex-dividend date (often for a debit) or roll it out to a date past the dividend — the roll calculator shows what that costs. If you don't mind being called away at the strike, let it happen: that is the last leg of the wheel strategy, and it arrived a little early.
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