Option Assignment & Exercise
Understanding assignment and exercise is crucial when selling options, as it determines when you must fulfill your obligations.
Assignment (for Sellers)
If you sell a call → you may be forced to sell 100 shares.
If you sell a put → you may be forced to buy 100 shares.
This only happens when the contract finishes in the money.
Exercise (for Buyers)
If you buy an option, you can choose to exercise it, but most people simply sell the contract for profit.
Early Assignment
Rare, but possible for:
- Dividends
- Deep ITM options
- Near expiration