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What is option assignment?
Learn why a short option can create a share-delivery or share-purchase obligation before or at expiration
Prepared by Mark · Primary sources below
Direct answer
Option assignment is the process that places an exercise obligation on a short option position. If assigned on a short call, the seller is obligated to deliver the underlying shares at the strike price; if assigned on a short put, the seller is obligated to buy shares at the strike. Assignment depends on the contract style, exercise decisions, clearing process, and broker procedures
Exercise creates the other side's obligation
The holder of a long option may exercise under the contract's terms. When an exercise notice is allocated to a short position, assignment requires the option writer to fulfill the contract: deliver shares for a call or buy shares for a put at the strike price
Before expiration is possible for some contracts
American-style equity options may be exercised on a business day before expiration, so a short position can carry assignment risk while it remains open. A short call's risk can deserve special attention around an ex-dividend date, though no signal can guarantee when assignment will occur
Expiration handling requires account-specific confirmation
OCC uses an exercise-by-exception process for certain equity options that are at least one cent in the money at expiration unless contrary instructions are given. Exact thresholds, deadlines, buying power requirements, and account treatment should be confirmed with the brokerage firm
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