What is option assignment?
In one line: Assignment is when an option seller must do what they promised: sell shares at the strike for a call, or buy them at the strike for a put.
How it works
Every option has a buyer and a seller. The buyer has a right. The seller has a duty.
When a buyer uses their right, called Exercise, a seller somewhere gets assigned. In the US, the Options Clearing Corporation (OCC) assigns exercises to brokers, and brokers pick which of their customers get them.
A simple example
You sold one $50 call on a stock. The stock rises to $58, and you get assigned.
- If you own 100 shares (a Covered call): they're sold at $50. You keep the premium you collected.
- If you don't own the shares: your account now holds 100 shares short at $50. With the stock at $58, that's $800 against you, before the premium. It can grow if the stock keeps rising.
Now the other side. You sold one $40 put. The stock drops to $35 and you're assigned. You must buy 100 shares at $40, which is $4,000 for shares now worth $3,500.
When it can happen
- At expiry: options that finish in the money are usually exercised, so sellers get assigned.
- Early: most US stock options are American-style, so assignment can come any day before expiry. It's more likely when an option is deep In the money, or for calls just before an Ex-dividend date.
Why it matters
Assignment can change your account overnight. A small options trade can become a share position worth thousands. If you don't have the cash, you may get a Margin call.
A common mistake
Holding a sold option into expiry without a plan. If it's near the strike on the last day, you can't be sure what happens. Close it before the end if you don't want the shares.
For spreads, an early assignment on one leg can leave the other leg open. Check your account the morning after any assignment.
See options trading basics for the full picture.
Questions
Can you be assigned before the expiration date?
Yes, on American-style options, which includes most US stock options. Index options are often European-style and can't be.
Who gets assigned on an option?
Someone who sold that option and still holds it. The OCC assigns to brokers, then brokers choose among customers, often at random.
How do I avoid assignment?
Buy the option back before expiry. That closes your side of the contract.
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