Tim,
In response to your question.
The way this trade was setup was that it was originally a put buy, but as the trade really started to work for us, we evolved this trade into a bear put spread… I mistyped earlier and said it was a bear call spread but it’s actually a bear put spread.
Learn about bear put spreads here.
Now remember– we don’t have to stay in the trade all the way to expiration, and we really wouldn’t do that on a swing trade.
With respect to assignment on the short option… since you have a long option that is more in the money, you are “covered” if you do get assigned.
But you won’t get assigned. There are three times that happens:
1. If your option is below parity– that means no extrinsic value
2. If you have a short call and the stock is going ex dividend
3. Someone did something stupid
So if you were to get assigned, it would probably be reason #3… which means you’d end up with long stock and a long put. You can then just sell to close the stock, and re-sell the short put, and you also keep the extra extrinsic value from the early assignment.