Hi,
I have been buying bull-puts for stocks trending down and bear-calls for stocks trending up at 1.2 SD with > 30 days expiry. Some of them have been assigned. These stocks have reasonable liquidity.
What is the best strategy to handle the assignments?
a) Close them out and take an immediate loss.
b) Close them out by writing ATM calls for long assignments and puts for short assignments in the next expiry date.
c) Continue believing in mean reversion principles and write covered calls…