Put Option Assignment: GOOG

 Options trading can be complex, but sometimes the best way to understand it is through a real-world example. Today, I'll walk you through a recent Google (GOOG) put option trade that resulted in assignment, breaking down the mechanics and mathematics involved.

The Initial Trade Setup

On February 4, 2025, with GOOG trading at $204.50, I sold a put option with the following specifications:

• Strike price: $192.50
• Expiration date: February 7, 2025
• Premium received: $1.87 per share ($187.00 total)
• Net credit after fees: $186.96

At the time, this seemed like a reasonable trade. The strike price was about 6% below the current market price, and I collected a decent premium for a three-day holding period.

What Happened Next

The market had other plans. Following disappointing earnings results and concerns about cloud sales, GOOG's stock price took a significant dive. By expiration on February 7, the stock had fallen to $187.14, well below our strike price of $192.50.

The Assignment Process

Since the put option was "in-the-money" at expiration (market price below strike price), it was exercised, and I was assigned 100 shares of GOOG at the strike price of $192.50 per share. Here's how the numbers broke down:

• Cost of assigned shares: $19,250 (100 shares × $192.50)
• Premium received: $186.96
• Net cost basis: $19,063.04
• Effective purchase price per share: $190.63

Lessons Learned

This trade illustrates several important options trading principles:

1. Always be prepared for assignment: When selling puts, you must be ready to buy the underlying stock at the strike price.
2. Premium matters: The $186.96 premium reduced our effective purchase price by nearly $2 per share.
3. Earnings events carry risk: The significant price drop following earnings reminds us that selling options through earnings carries additional risk.

Looking Forward

Now that I own 100 shares of GOOG at an effective price of $190.63, I have several choices:

• Hold the shares for potential recovery
• Sell covered calls to generate additional income
• Sell the shares and take the loss

Final Thoughts

While this trade didn't work out as planned, it demonstrates how options assignments work in practice. The premium received helped cushion the blow, but it's a reminder that selling puts is essentially agreeing to buy shares at a specific price - and sometimes that's exactly what happens.Remember: Options trading involves significant risk, and it's crucial to understand the mechanics before entering any position. Always be prepared for the worst-case scenario, and never sell puts on shares you aren't willing to own.