When Can Assignment Risk Occur on Short Options?

Assignment risk on short options can occur in two situations: early assignment at any time before expiry, and automatic assignment at expiration if the position is still open. Pluang's US Stock Options and US ETF Options are American-style contracts, meaning the buyer holding the long side can exercise the contract on any trading day up to and including the expiry date — not only at expiry. As the seller of a short call or short put, you carry assignment risk from the moment you open the position until it is closed or it expires. The risk rises sharply once your short position moves against you, because that same price move puts the option buyer in a profitable position, making early exercise more attractive to them. On the expiry date itself, any short option still in-the-money for the buyer is automatically exercised, and Pluang force-closes the open position roughly one hour before market close rather than letting it run to a passive cash settlement.

Two conditions that trigger assignment

• Early assignment (before expiry): Because American-style contracts let the buyer exercise whenever they choose, assignment can land on you at any time your short position is losing money. The deeper the position is in-the-money for the buyer, the more likely they are to exercise the contract rather than sell it back on the open market.
• Assignment at expiration: If you have not closed a losing short position by expiry day, Pluang force-closes the open position approximately one hour before market close. This is an active close carried out by Pluang, not a passive cash-settlement event — you will not simply see cash settle at a final reference price with no action taken beforehand.

Assignment risk sits entirely with the seller of an option, not the buyer. If you only ever buy options (long calls or long puts), you are never at risk of assignment — your maximum loss is capped at the premium paid, and only you decide whether to exercise.

Related questions:

Q: Can I exercise an option before its expiry date on Pluang?
Yes, if you are the buyer (long position) of an American-style option. Pluang's US Stock Options and US ETF Options can be exercised on any trading day up to and including expiry, not only on the expiry date itself. This is the same mechanic that creates early assignment risk for sellers: whenever a buyer chooses to exercise, the matched short position on the other side of that contract receives an assignment and must fulfill the contractual obligation immediately, regardless of how much time remains until expiry.

Q: What happens to my collateral if my short option is assigned?
Once assigned, your short position is closed and you must fulfill the contract's obligation — for a short call this typically means delivering the underlying shares, and for a short put it means buying them, at the strike price. Any margin or collateral held against that position is applied toward settling the obligation. Because this happens automatically the moment assignment is received, keep enough funds or shares available if you plan to hold a losing short position rather than closing it yourself.

Q: Does closing my short position early remove assignment risk?
Yes. Once you buy back (close) a short call or short put before expiry, you no longer hold an open obligation, so assignment can no longer be applied to that position. This is the most direct way to manage assignment risk on Pluang: monitor a losing short position and close it yourself rather than waiting to see whether the buyer exercises early or the position runs to expiry, where Pluang's force-close mechanic takes over automatically.

Q: Am I notified when my short position is assigned?
Yes, an assigned position is reflected in your Pluang portfolio and order history as soon as the assignment is processed. Because assignment on American-style options can happen on any trading day — not just at expiry — check your open short positions regularly rather than assuming no action is needed until the expiry date. This is especially important once a short position moves into a loss, since that is when assignment likelihood increases.