What is Assignment Risk in Options?

Assignment risk is the possibility that the option you sold will be exercised by the buyer, requiring you to fulfill your obligation.

When Assignment Happens

For Covered Calls:

  • You must sell your shares at the strike price
  • Usually happens when option is ITM at expiration
  • Can happen early (rare for calls)

    • For Cash-Secured Puts:

  • You must buy shares at the strike price
  • Usually happens when option is ITM at expiration
  • Early assignment more common than calls

    • When You're MOST Likely to Be Assigned

  • Option expires ITM - Almost guaranteed
  • Right before ex-dividend - If call's time value < dividend
  • Deep ITM options - No time value left
  • Expiration week - Gamma increases assignment probability

    • Early Assignment: When & Why

    Early assignment is rare but happens when:

  • Option is deep ITM
  • Time value is nearly zero
  • Dividend exceeds remaining time value
  • Buyer needs to exercise for other reasons

    • How to Manage Assignment Risk

  • Roll before expiration - If you want to keep shares
  • Monitor delta - Higher delta = higher risk
  • Watch ex-dividend dates - Roll before if needed
  • Have a plan - Know what you'll do if assigned
  • Keep cash ready - For put assignment

    • Is Assignment Bad?

    Not necessarily! Assignment just means:

  • Your trade worked (for covered calls)
  • You're buying at agreed price (for puts)
  • You made premium + any gains to strike