What is assignment?Assignment
When a buyer exercises, the exchange randomly picks a seller to deliver: a call seller must hand over shares, a put seller must buy them.
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- Options: Next StepsCash-Secured Puts: Buying Stock at a Discount
Set aside the cash to buy the stock, then sell a put and collect the premium up front. If the price doesn't drop, you keep the money; if it does, you buy a stock you wanted anyway at a cost of strike − premium.
- Options: Next StepsCovered Calls: Collecting Rent on Your Shares
You already hold 100 shares, so you sell 1 call to collect a premium. If the stock doesn't rise you earn extra income; if it soars, your shares get bought at the strike. You trade upside for cash.
- Options: Next StepsExercise, Assignment and Expiration Day
What actually happens on expiration day? In-the-money options are auto-exercised, sellers get randomly assigned, and your shares and cash change hands. Plus, why exercising early usually doesn't pay.
Related terms
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