What Happens When You’re Assigned in Options Trading
If you get assigned on an options contract, things move quickly. As the option seller, you have to meet your obligations right away.
This means you suddenly have new financial responsibilities and deadlines. Your trading account will show these changes almost immediately.
How Assignment Works and When It Happens
Assignment usually takes place after the market closes, not during normal trading hours. You’ll find out about it the next morning.
The Options Clearing Corporation picks firms with short option positions at random. Then, your broker assigns the notice to you, either randomly or using a first-in, first-out method.
American-style options can get assigned at any time before expiration. European-style options only get assigned during a set window before expiration.
Most assignments happen close to expiration. Still, early assignment can pop up if:
- The stock price swings a lot
- Shares are tough to borrow
- There are corporate actions, like buyouts
Only about 7% of all options get exercised. But that doesn’t mean you’ll only get assigned 7% of the time on your short positions. The odds can feel much higher.
What Sellers and Buyers Have to Do
If you’re the option seller, you can’t dodge your duties when assigned. You just have to go through with it.
For call options:
- You deliver 100 shares per contract at the strike price
- You get cash equal to the strike price times 100
- If you don’t own the shares, you’ll have to buy them first
For put options:
- You buy 100 shares per contract at the strike price
- You pay cash equal to the strike price times 100
The option buyer holds the rights, not the obligations. They decide when to exercise, even if the option is out-of-the-money or trading is halted.
What Assignment Does to Your Account
Assignment changes your account balance and positions right away. Your broker updates your account to show new stocks and cash moves.
Financial impact by option type:
| Option Type | Your Obligation | Cash Flow | Stock Position |
| Short Call | Deliver shares | Receive cash | Short stock (if you don’t own shares) |
| Short Put | Buy shares | Pay cash | Long stock |
Your account balance changes right away. You’ll see the new positions the next trading day.
If you’re assigned on part of a multi-leg strategy, you have to manage the rest yourself. Brokers don’t close out the other legs for you.
Assignment can cause big losses if the stock moves against you. The option premium you collected might not be enough to cover it.
Assignment Risks, Managing Them, and What You Can Do
Assignment brings on sudden obligations that can stress your account and cause surprise losses if you don’t handle them well. Early assignment is especially tricky, but you can use certain strategies to protect your capital.
Risks and Losses from Assignment
Cash Needs and Margin Calls
If you’re assigned on a short put, you have to buy shares at the strike price. That means you need enough cash for 100 shares per contract, right away.
If you don’t have enough buying power, you’ll get a margin call. Your broker might make you add money or sell off positions to cover it.
Short Stock Headaches
Assignment on short calls puts a short stock position in your account. Now you owe shares you might not even own.
Short positions rack up borrowing fees and can eat into your profits. You’ll also owe any dividends paid out while you’re short.
Spread Strategy Problems
In spreads, if you get assigned on one leg and the other expires worthless, you can take the biggest loss. Your long option won’t help if it’s out of the money.
Early assignment can mess up your plans and force you to act fast. You might have to close positions at a bad price or end up holding shares you didn’t want.
How to Handle Being Assigned
What to Do After a Call Assignment
If you’re assigned on a short call, you have to deliver shares at the strike price. If you don’t own them, your account goes short.
You can buy shares right away to cover. Or, if you have a long call in a spread, exercise it to deliver the shares.
What to Do After a Put Assignment
Put assignment means you have to buy shares at the strike price. Your account gets the shares, and you pay the full contract value.
If you like the stock, keep the shares. Not interested? Sell them right away. In spreads, exercise your long put if it’s worth more than selling the shares in the market.
Handling Spread Assignments
Assignment in spreads means you have to juggle both legs. Don’t let your long option expire if it still has value.
If your long option is in the money and it’s better to exercise, do it. Otherwise, sell it before expiration to grab any leftover value.
How to Lower Assignment Risk
Keep an Eye on Your Positions
Watch your short options as expiration gets close. Options more than $0.50 in the money are especially risky for assignment.
Check your positions every day in the final week. After-hours trading can push options in the money, too.
Close Out Early
Close your short positions before expiration if assignment risk is rising. Buy back options trading under $0.10 to wipe out the risk completely.
Some brokers will even close out cheap options for you automatically. That way, you avoid getting assigned on nearly worthless positions.
Be Aware of Dividend Dates
Assignment risk jumps before ex-dividend dates on short calls. Option holders might exercise early to grab the dividend.
Close your short calls before ex-dividend dates if the dividend is more than the option’s time value. This stops you from ending up short and owing the dividend.
Assignment Scenarios and Real-Life Examples
Assignment happens when an option writer gets told they have to meet the contract terms. For calls, you have to sell shares at the strike price. For puts, you’re forced to buy shares at the strike price.
Call Option Assignment: What It Looks Like
If you sell a call, assignment can happen if the option goes in-the-money (ITM). This usually means the stock price moves above your strike price.
Example: You sell a call with a $50 strike on XYZ stock. The stock jumps to $55 before expiration. The buyer exercises their right to buy your shares at $50.
You must deliver 100 shares per contract at $50. If you don’t own them, your account goes short. Your broker will short 100 shares to settle things.
Assignment often pops up right before dividend dates. Call owners exercise early to get the dividend. Dividend-paying stocks and ETFs usually see more assignments then.
You get the assignment notification after the market closes. The process is random among all ITM call writers.
Put Option Assignment: What to Expect
Put assignment happens if you sell puts that finish ITM. The put owner makes you buy their shares at the strike price.
Example: You sell a put with a $40 strike on ABC stock. The stock drops to $35 by expiration. You get assigned and must buy 100 shares at $40 each.
Your account now has 100 shares. You pay $4,000 for shares worth $3,500 in the market.
Early put assignment isn’t as common as with calls. It usually happens when the option has almost no time value left and the stock trades well below the strike.
Spread positions can get messy if only one leg gets assigned. You can end up with an unprotected stock position.
How Assignment Changes Your Stock and Cash
Assignment shifts your account positions overnight. Call assignment gives you a short stock position needing margin. Put assignment uses your cash to buy shares.
Your buying power drops with new stock positions. Short positions from call assignment need margin. Long positions from put assignment tie up your cash.
The premium you got from selling the option is your only profit if you’re assigned at expiration. Early assignment can mess with your expected returns.
Keep a close eye on ITM positions before expiration. You can buy back your short options to avoid assignment, but it’ll cost you.
