GLOSSARY // Options
Assignment
Assignment is when an option seller is required to fulfill the contract: deliver 100 shares at the strike on a short call, or buy 100 shares at the strike on a short put. Exercise is the buyer's action; assignment is what lands on the seller, allocated by the OCC among the short holders.
At expiration, options finishing $0.01 or more in the money are exercised automatically, so a short option even a penny past the strike gets assigned. American-style equity options can also be assigned early — most commonly on short ITM calls the day before an ex-dividend date, when the dividend is worth more than the call's remaining extrinsic value.
You sold a 50 put for $1.20 and the stock closes at $48.90 on expiration Friday. The put is $1.10 in the money, so you are assigned: $5,000 buys 100 shares now worth $4,890, a $110 paper loss that the $120 premium just covers — and you now hold the shares and their risk. A close at $50.05 instead, and the put dies worthless.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.