What Is Assignment? Meaning & Example
Definition
Assignment happens when an option seller is required to fulfill the contract because the buyer exercised it. Call sellers deliver shares; put sellers buy shares at the strike.
Related terms
A covered call combines owning at least 100 shares with selling a call option on them to collect premium. It generates income but caps upside above the strike.
Strike PriceThe strike price is the set price at which an option holder can buy (call) or sell (put) the underlying asset. It determines whether an option has intrinsic value.
Expiration DateThe expiration date is the last day an option contract is valid. After it, the option either is exercised, assigned or expires worthless.
What is Assignment?
Assignment happens when an option seller is required to fulfill the contract because the buyer exercised it. Call sellers deliver shares; put sellers buy shares at the strike.
Can you give an example of Assignment?
If you sold a $40 put and the stock closes at $36 at expiration, you may be assigned and buy 100 shares at $40.