Assignment risk / early assignment

The chance a short option is assigned before expiration — most likely on in-the-money calls around a dividend.

Assignment happens when the holder of an option exercises it and, as the option seller, you are obligated to fulfill the contract. Sell a put and get assigned, and you must buy 100 shares at the strike; sell a call and get assigned, and you must deliver 100 shares. American-style equity options can be assigned any day before expiration, which is where the word early comes in. You never control the timing; the long side decides.

In practice, early assignment on calls tends to cluster around ex-dividend dates. If you are short a call that is in the money and the extrinsic value left is smaller than the upcoming dividend, the holder has a reason to exercise early to capture that payout, leaving you short the stock and on the hook for the dividend. Deep in the money puts can also be assigned early when almost no time value remains.

A common mistake is holding a short in the money leg through ex-dividend and assuming it is safe because expiration is still weeks away. Watch the extrinsic value of your short options: when it shrinks toward zero, assignment risk climbs. Rolling or closing the position beforehand is usually cheaper than being caught with an unwanted stock position and a margin call the next morning.

← Back to the glossary · Guides · Strategies

All options terms

Educational use only. Quotes are delayed ~15 minutes and nothing here is financial advice. Options trading involves substantial risk of loss.