Assignment

Assignment is what happens to an options seller when the person on the other side of the trade decides to use their option. If you sold a call, assignment means you're now obligated to sell 100 shares (per contract) at the strike price. If you sold a put, assignment means you're obligated to buy 100 shares at the strike price. It is the seller's side of the coin from the buyer's "exercise."

Here's the mechanic underneath it. An option is a contract: the buyer pays a premium for the right (not the obligation) to buy or sell shares at a fixed strike price. The seller, in exchange for collecting that premium, takes on the opposite obligation. When a buyer exercises their right, the options clearing house doesn't call that specific buyer's counterpart directly — it randomly selects a broker holding a matching short position, and that broker in turn assigns the notice to one of its own clients, often randomly or on a first-in-first-out basis. So an individual trader who sold an option has no control over when assignment happens, and often no advance warning beyond "it can happen anytime the option has value, and is far more likely as expiration nears or around dividend dates for calls."

The nuance that catches beginners: assignment does not only happen at expiration. Any American-style option (most U.S. equity options) can be assigned at any point once it is in-the-money, meaning the strike price is already favorable to the buyer relative to the current stock price. A trader who sold a call thinking "I'll deal with it Friday" can wake up Wednesday and find the shares already sold out of their account. European-style options, by contrast, can only be exercised at expiration, which removes that early-assignment surprise.

For a day trader specifically, assignment turns an options position into a stock position overnight, with real settlement and margin consequences that a pure options trade did not have.