What is Options Assignment?
Options assignment can only happen to a trader that has sold a call or sold a put.
If you sold a call (Covered call strategy):
You are going to get rid of your shares if the current stock price is above the strike price you already picked.
If you sold a put (Cash secured put strategy):
You are forced to buy the shares at the strike price you already picked.
In short, assignment means:
If you’re the one who sold the option, you have to buy the underlying asset (if you sold a put) or sell the underlying asset (if you sold a call) at the strike price you agreed on.
There are two main ways this can happen:
- Call option assignment: If the buyer exercises a call, you’ll need to sell your shares at the strike price. Sometimes that’s fine, sometimes it stings.
- Put option assignment: If the buyer exercises a put, you’re on the hook to buy shares at the strike price. Even if the stock’s tanked, you’re still in.
As an option seller, you don’t have to do anything unless the buyer actually exercises their option.
That usually happens on the last day of your option trade.
Until then, your trade is just a contract hanging out in your account.
But once they pull the trigger, your agreement becomes an actual responsibility—no backing out.
Some things make assignments more likely.
Options that are deep in the money or close to expiration tend to get exercised more.
If you get assigned, here’s what you’re facing:
- Sold a call? You’ll have to deliver shares. If you don’t own them, you’ll need to buy them on the market—maybe at a worse price.
- Sold a put? You’re buying shares, even if the price has dropped below your strike.
Knowing this stuff can help you avoid nasty surprises.
It’s smart to keep an eye on your options and tweak your trades if you want to dodge assignments.
No one likes an unwelcome shock, right?
The difference between exercise and assignment
When you exercise your option trade that means you’re choosing to convert an options contract into its underlying asset.
This can happen to you if you’re buying options.
Here’s an example:
You bought a $3.00 call on a stock that was back at the time $2.80.
In the meantime, the stock climbed up to $3.60.
This is when you can choose to exercise your call trade – buy the stock for cheaper and then sell it for a profit.
Basically you flipped a stock instantly by reserving it at a lower price and then got rid of it for much more.
An assignment on the other hand is when you’re forced to fulfill the obligation.
This can happen to you if you’re selling options.
The difference:
“Exercise” is your decision and gives you control;
“Assignment” is something that happens to you, often unexpectedly, and suddenly you’re holding shares or need to deliver them.
Examples:
If you’re selling covered calls and the stock rockets past your strike price, you might get assigned and lose your shares.
If you’re holding a long call that’s profitable, you exercise it yourself to capture the gains.
What happens when you get assigned?
Getting assigned means you have to honor your contract/trade that you’ve previously made.
This happens when you’re selling a call or selling a put (covered call or cash secured put strategy).
Why assignment happens?
Assignment happens because the buyer decided to use their rights.
This means that if you’re short a call (covered call strategy), you now have to sell 100 shares at the strike price of your trade.
If you’re short a put (cash secured put strategy), you’re forced to buy 100 shares at the strike price, so your cash gets converted into stock, often at a higher price than where it’s trading now, which is why it can feel like you’re “catching a falling knife” whether you planned to or not.
