Assignment

What Is an Assignment?

In options trading, assignment is the notice an option seller receives when the buyer of that option decides to exercise it. Once assigned, the seller must carry out the contract's terms: delivering shares if the option is a call option, or buying shares if it is a put option. The seller has no say in the timing, because the buyer makes that decision.

How Assignment Works

Every option contract has a buyer, who holds the right to exercise, and a seller, who holds the obligation. When a buyer exercises, the Options Clearing Corporation (OCC) assigns the obligation to a seller with a matching open position, and that assignment passes through the seller's broker. Brokers allocate assignments among their customers using their own procedures.

For a short call, the seller must sell shares at the strike price. For a short put, the seller must buy shares at the strike price. Standard US stock options typically cover 100 shares per contract, so one assigned contract means delivering or buying 100 shares.

Assignment can occur before expiration with American-style options, which is the usual style for individual US stock options. It happens most often near expiration or around ex-dividend dates. European-style options can be exercised only at expiration.

Why It Matters to Investors

Assignment is a risk for anyone who sells options. A seller may be assigned earlier than expected, which can create an unplanned stock position or change the cash needed to meet the obligation. A seller who does not own the shares needed for a short call may end up with a short stock position.

Option buyers are not exposed to assignment in the same way. They decide whether to exercise, and they can also let the option expire or sell it in the market.