Definition
Assignment occurs when an option buyer exercises their right and the option seller (writer) must fulfill the contract obligation. Call sellers must sell shares at the strike price; put sellers must buy shares. Assignment risk increases for ITM options near expiration or around ex-dividend dates.
Example
You sold a $50 put. If the stock falls to $45 and the buyer exercises, you must buy 100 shares at $50 despite the lower market price.
FAQ
What is Option Assignment?
When an option seller must fulfill the obligation of the contract.
Why is Option Assignment important?
Option Assignment helps investors evaluate options and make more informed decisions.