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What is assignment, in simple terms?
Assignment is the moment the promise you sold gets called in. The option buyer uses their right, and you buy or sell 100 shares at the strike price.
The short answer
When you sell an option, you make a promise. The buyer can call that promise in. When they do, you're assigned: you must keep the promise.
- Sold a put? You buy 100 shares at the Strike price.
- Sold a call? You sell 100 shares at the strike price.
You keep the premium either way. It was yours the moment the trade filled.
When it usually happens
Assignment usually happens at expiry, when the option finishes "in the money":
- A put is in the money when the stock is below the strike.
- A call is in the money when the stock is above the strike.
Options that end in the money by even a cent are usually exercised for the buyer automatically.
US stock options can also be used before expiry. That's early assignment. It's less common, but it happens, most often on calls just before an Ex-dividend date.
Two examples (an illustration, not a trade idea)
A put assigned. A made-up stock, XYZ, trades at $50. You sell a $45 put for $1.00 and collect $100. Your broker sets aside $4,500.
At expiry, XYZ is at $40. You're assigned. $4,500 leaves your cash. 100 shares appear in your account, worth $4,000.
A call assigned. You own 100 shares of XYZ bought at $50. You sell a $55 call for $1.00 and collect $100.
At expiry, XYZ is at $60. You're assigned. Your 100 shares leave. $5,500 lands in your cash.
How each one works out
| Trade | Stock at expiry | What moves | Result |
|---|---|---|---|
| $45 put, sold for $1.00 | $50 | Nothing; put expires | +$100 |
| $45 put | $40 | You buy 100 at $45, worth $40 | −$500 + $100 = −$400 |
| $45 put | $30 | You buy 100 at $45, worth $30 | −$1,500 + $100 = −$1,400 |
| $55 call on shares bought at $50 | $50 | Nothing; call expires | +$100 |
| $55 call | $60 | Your shares sold at $55 | +$500 + $100 = +$600 (missed $500 more) |
Math examples, not promises. Put assignment can bring a real loss. Call assignment usually means a capped gain, unless your strike is below what you paid.
Is assignment bad?
Not by itself. In the wheel strategy, assignment is part of the plan. You sell a put hoping to buy shares at a good price. You sell a call ready to sell them at a good price.
It hurts in two cases:
- You get shares you didn't really want, at a price far above where they trade now.
- Your shares get sold below what you paid, because the call's strike was too low.
Both come from choices made before the trade. Pick strikes you'd truly be happy with.
What to do after
- After a put assignment: you own 100 shares. Decide your plan: hold, sell, or sell a covered call at a strike above your cost.
- After a call assignment: you have cash. Decide if you want to sell another put.
To spot it in your account, read how to know if you got assigned.
Questions
Can I stop assignment?
You can buy the option back before it's assigned. Once you're assigned, it's done. You can't undo it, but you can sell the shares or buy them back afterward.
Do I keep the premium if I'm assigned?
Yes, always. On a put, it lowers your real cost per share. On a call, it adds to your sale price.
Who decides if I get assigned?
The buyer chooses to exercise. Then the clearing house and your broker pick which seller is assigned, usually at random. You don't get a say.
Do I need to do anything when I'm assigned?
No. Shares and cash move by themselves. Just make sure you have the cash for a put, or the shares for a call.
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