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Why position management matters

A covered call or a cash-secured put can be a conservative, rules-based way to generate income or build a position at a planned price. But options have a clock. When time runs short, the range of good choices can narrow quickly.

Position management helps investors:

• Avoid surprises near expiry
• Keep decisions aligned with the original goal (income, entry level, or long-term ownership)
• Reduce the risk of emotional last-minute actions
• Understand when “doing nothing” is the sensible choice

A simple way to think about it is: The trade is the plan. Management is the steering wheel.

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The three actions you can take

When an options position is open, there are only three broad actions available. Everything else is a variation of these.

1) Do nothing

Sometimes the best decision is to let the position run.
This is common when:

• The stock is still behaving as expected
• The option still has plenty of time left
• You are comfortable with the original outcome (being assigned or not)

“Do nothing” is still a decision. It means you have checked the trade and chosen to keep the plan.

2) Close the position

Closing means buying back a short option to end the obligation.
This is typically considered when:

• New information changes the investment case (earnings guidance, regulatory news, a profit warning)
• The position has become too large relative to your portfolio
• You want to remove assignment risk (for example, before a weekend or an event)

Closing can be done at any time while the market is open. The key trade-off is that closing often means giving back part of the premium you received.

3) Adjust the position (most often by rolling)

Adjusting usually means replacing the current option with a new one. The most common adjustment is a roll.
A roll is two steps, typically done as one combined order:

• Close the current option
• Open a new option (often with a later expiry, sometimes with a different strike)

Rolling is mainly used to:

• Buy more time
• Change the price level where assignment could happen
• Reshape the trade to fit a new view of the stock

Rolling is not a free fix. It is a new decision with a new risk profile.

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A 60-second decision checklist

When a position feels uncomfortable, investors often want a single “correct” answer. In practice, the best choice depends on the goal.
This checklist is designed to be fast and repeatable.

1) What is the original goal?

Pick the closest match:

• Income: Collect option premium while accepting that the outcome might be selling shares (covered call) or buying shares (cash-secured put)
• Entry level: Get paid while waiting to buy shares at a planned price (cash-secured put)
• Exit level: Get paid while being willing to sell shares at a planned price (covered call)
• Long-term ownership: The priority is keeping the shares, not maximising option income

If the goal has changed, the management decision often changes too.

2) How much time is left?

Time matters because assignment risk increases as expiry approaches.

• More than 10 trading days left: Usually more flexibility
• 3 to 10 trading days left: Decisions become more urgent
• 0 to 2 trading days left: Outcomes can be forced quickly and small price moves matter more

3) Did something change that affects the stock?

Examples include:

• Earnings or guidance surprises
• Unexpected corporate news (takeover talk, product issues, regulation)
• Broad market shocks

If the stock’s story has changed, staying the course may no longer be the conservative choice.

4) What outcome are you comfortable accepting?

Be specific:

• “I am fine selling my shares at the strike.”
• “I am fine buying shares at the strike.”
• “I do not want to sell my shares.”
• “I do not want to buy the shares anymore.”

If you are not comfortable with the most likely outcome, consider closing or adjusting.

5) What is the cost to change your mind?

If you sell an option, you receive premium upfront. If you later close or roll, you often have to pay some of that value back.
The practical takeaway is: Management is usually cheaper when there is still time left, and often more expensive when time is nearly gone.

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Common surprises and where to find the solution

These are situations investors frequently encounter. Each has a practical playbook.

• When a covered call moves into the money

This happens when the stock rises above the call strike. If the position is held to expiry, the investor may be assigned and the shares may be sold.

→ See: How to manage covered calls

• When a cash-secured put moves into the money

This happens when the stock falls below the put strike. If held to expiry, the investor may be assigned and buy the shares.

→ See: How to manage cash-secured puts

• Being assigned earlier than expected

Some assignments can happen before expiry. This is uncommon, but it tends to occur in specific conditions.

→ See: How to manage covered calls (for early assignment considerations)

• Being assigned shares you no longer want

Sometimes investors sold a put mainly for income and later realise they no longer want to own the shares.

→ See: How to manage cash-secured puts (for post-assignment choices)

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What this guide does not do

This guide is designed to be evergreen and practical. It does not attempt to predict market direction or provide a single “best” action for every case.

Position management works best when investors:

• Define acceptable outcomes before entry
• Size positions conservatively
• Review open positions regularly, especially as expiry approaches

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FAQ

• Do I have to manage every position?

Not necessarily. Many positions are best managed by monitoring and letting them run, especially when the original outcome is still acceptable.

• Is rolling always the right move if the option is in the money?

No. Rolling can make sense, but it is not automatic. A roll should have a clear purpose, such as buying time or improving the price level of a potential assignment.

• What is the biggest mistake investors make?

The most common mistake is entering a trade without being comfortable with the core outcome: selling shares with a covered call, or buying shares with a cash-secured put.

Important information

Options involve risk and are not suitable for all investors. Any strategy examples are for educational purposes only and do not constitute investment advice. Outcomes depend on market conditions, pricing, fees and taxes, and investor circumstances.