Say on the 10/1 you buy 100 shares at $15 and on 10/2 you sell a covered call with a strike price of 20. Say on 10/3 you buy 100 more shares at $17 and on 10/4 you sell a covered call with a strike price of 25. Say on options expiration day price closes at $23, so the first call gets assigned. Which shares get called away? The $15 ones or the $17 ones?
For Cost Basis reporting for the new IRS rules. The assignment of an option would be considered as a sell, and as such would be considered as the same designation that you declared for any other sell. Most likely as FIFO. However as I understand the new Cost Basis rules, the customer has the right to designate which LOT to be sold for cost basis. I'm sure that same rule would apply to shares sold via assignment. I have worked with a number of Brokerage Firms for the IRS Cost Basis compliance as a systems analyst. All of the firms have also adopted time limits as to when the customer must designate the LOT to be sold for cost basis if it differs from the default "FIFO". I hope this provides an answer. Should be better than the snide remarks submitted by mostly wanna-be's here.
The IRS assumes FIFO unless you identify the shares being sold. That's the easy part. The problem with "identification" is that you must receive written confirmation from your broker of this. See IRS publication 550, somewhere under Sales of Investment Property.
As I stated, you tell your broker the LOT you wanted if not the default and it shows up on your confirm. Firms have been doing this since I first started working in the buz (1981) what's the problem...?