Strategy Risk & Assignment

Assignment turns an option into a stock trade, sometimes when you least expect it. Here is how assignment works, when early assignment is likely and the risks that catch options sellers off guard.

How assignment works

When an option buyer exercises, the Options Clearing Corporation randomly assigns the obligation to a broker with a matching short position, and the broker assigns one of its customers. A short call seller must deliver shares; a short put seller must buy them. Most U.S. stock options can be exercised on any day before expiration.

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