Assignment
When an option seller is required to fulfill the contract’s obligation.
Also called: assigned · exercise
In plain language
When a buyer exercises, a seller somewhere is assigned. A short call seller must deliver shares; a short put seller must buy them.
American-style options can be assigned any time before expiration, though early assignment is most common around dividends and deep in-the-money contracts.
Assignment converts an options position into a stock position, often overnight and often much larger than the trader expected.
Why it matters
An unexpected assignment can create a position far larger than your account can comfortably hold, turning a defined-risk trade into a margin problem.
Common mistakes
- Holding short in-the-money options through an ex-dividend date.
- Assuming assignment can only happen at expiration.
- Not knowing what stock position an assignment would create, or whether the account could fund it.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
The date an options contract ceases to exist.
An option that currently has intrinsic value.
The capital your broker requires you to post to open and hold a leveraged position.
A cash payment distributed to shareholders out of company profits.
A contract giving the right, but not the obligation, to buy an asset at a set price before expiration.