Assignment is the process by which the writer of an options contract is notified to fulfill the contract obligations after the holder exercises the option. For a call option, assignment requires the writer to deliver the underlying asset at the strike price; for a put option, assignment requires the writer to acquire the underlying asset at the strike price. In listed options markets, the Options Clearing Corporation (OCC) administers exercise and assignment, sending an exercise notice through the writer's broker and selecting a short writer to fulfill the obligation. The result appears in the writer's account as a new position in the underlying or as a cash settlement, depending on contract type and market rules.
Assignment is a routine mechanism that converts an exercised option into a concrete obligation for the writer. The OCC uses a random selection process to assign exercise notices to short option writers. The broker will then reflect the obligation in the writer's account, which can create a position in the underlying or trigger cash settlement if applicable. Margin requirements may change to reflect the new exposure. In cash settled contracts, no delivery of the underlying occurs; instead, a cash payment equal to the intrinsic value of the exercise is made to the counterparty.
Example: A trader who is the writer of a call option with a strike of 50 faces assignment after exercise; the writer must deliver 100 shares at 50 per share and, if they do not own the shares, must acquire them to fulfill the obligation.
Options contract · Exercise (options) · Options writer · Options holder · Options Clearing Corporation (OCC) · Delivery (options) · Cash settlement (options)