What is Option Assignment?
The assignment process can be very confusing to new options traders. The assignment process occurs after option buyers exercise their long option positions. At that point option sellers receive an assignment notice and are required to either sell or buy the contract’s underlying instrument at the strike price of the option. In today’s modern marketplace this process is automated and typically requires little action on the part of the trader.?
Key Takeaways
- The assignment process only involves options sellers. Option buyers cannot be assigned.?
- Put sellers who receive an assignment notice are required to purchase shares of the underlying instrument.
- Call sellers who receive an assignment notice are required to sell shares of the underlying instrument.
- Warning: The assignment process may trigger a margin call if you lack the capital to trade the required amount of underlying. ?
Still confused? Check out this quick video from our friends at the Options Industry Council