How do straddles that involve selling options protect against early assignment?

Question

When doing a covered straddle in options trading, it involves selling put and call options when entering the straddle. But there is no way of guaranteeing that your options won't be assigned before you reach your target prices. So is that just accounted for in the risk of the straddle before a decision is made, or am I missing something? It seems to me like that's an awfully risky move.

Answer 1

Yes, that's the risk.

If the stock is bouncing around a lot your options could get assigned. If it heads south you now are the proud owner of more of a falling stock.

It's good that you're looking to understand the risks of an investment method. That's important no matter what the method is.