When Can Assignment Risk Occur?

Assignment risk on Short Options can occur under two main conditions:

1. Assignment before the expiration date (Early Assignment)

Assignment can occur at any time when the buyer of an options contract chooses to exercise the contract, particularly for American-type options. The likelihood of assignment is greater when you are in a losing position because:

• When you lose, the contract buyer is in a profitable position.
• This increases the chances of the buyer executing the contract.
• As a result, you as the seller will receive an assignment to carry out contractual obligations.

2. Assignment on expiration date (Expiration Date)

If you do not close your losing Short Options position by the expiration date, then:

• Options contracts that are profitable for the buyer will be automatically executed.
• You will receive an assignment and must carry out your obligations as a contract seller.