← BeginnerLesson 17 · 4:40
What happens if you're assigned, including early?
Summary
You can explain assignment: when a buyer exercises, a seller must deliver, and you find out afterward. You can work out your result when a sold call or sold put is assigned. You know early assignment is most likely deep in the money, or on a sold call just before an ex-dividend date when the dividend is bigger than the time value left.
Key terms
- assignment
- When a buyer exercises and you, as the seller of that option, must deliver.
- early assignment
- Being assigned before the end date, which can happen on any day with American-style options.
- deep in the money
- An option whose stock price is far past the strike, with little time value left.
- ex-dividend date
- The date before which you must own the shares to get the dividend.
Check yourself
Answer each question to see why the right answer is right.
1. What is assignment?
2. You own 100 shares bought at $100 and sold a call with a strike of $100 for $345. You're assigned with XYZ at $110. Where are you?
3. When is early assignment most likely?
4. A dividend of $100 on 100 shares is coming, and the call you sold has $40 of time value left. Why might the buyer exercise early?
5. You sold a put with a strike of $100 for $341. XYZ falls to $70 and you are assigned. Where are you?
Finished the video and the quiz? .