Assignment

The process by which an option seller is required to fulfil the contract after the holder exercises it.

Example

A seller of a put is assigned and must buy 100 shares at the strike price.

Important

American-style options can be exercised before expiry, so a seller can be assigned earlier than expected.

Related terms

  • Call Option — A contract giving the buyer the right, but not the obligation, to buy an asset at a set price before or on a set date.
  • Put Option — A contract giving the buyer the right, but not the obligation, to sell an asset at a set price before or on a set date.

Lessons that explain it

  • Unlimited loss on the short side, spreads on every trade, and tax rules that vary by contract — Derivatives add risks shares do not have - assignment, margin calls, unlimited short losses - plus higher trading costs and tax treatment that differs by product and country. (13 min)

All 578 terms in the Investing glossary