Option Assignment
What It Is
Option assignment occurs when the seller of an option is obligated to fulfill the contract — delivering shares (calls) or buying shares (puts).
Why It Matters
Assignment affects risk, capital requirements, and position management for option sellers.
How It Works
- Sellers of short options face assignment risk
- Calls → deliver shares
- Puts → buy shares
- Assignment can occur any time for American‑style options
Key Components
- Obligation vs right
- Early assignment
- Exercise mechanics
- Capital impact
Example
A trader short a $50 call may be assigned if the stock rises above $50, requiring them to deliver shares.
Key Takeaways
- Assignment is a core risk of selling options.
- It can occur early, especially around dividends.
- Traders must manage capital and exposure.