Assignment

What Assignment Means

Assignment is the flip side of exercise. When an option buyer exercises their right, an option seller (writer) is selected — assigned — to fulfil the obligation. A call writer who is assigned must deliver (or cash-settle) the underlying at the strike; a put writer who is assigned must buy it at the strike. Assignment is what makes option selling carry obligation, not just opportunity.

Sellers cannot choose when they are assigned — the exchange allocates assignment among writers, typically at or near expiry for in-the-money options.

When Assignment Happens

For European-style options, assignment can only occur at expiry, and only on in-the-money contracts. For American-style options it can happen any time before expiry. The deeper an option is in-the-money near expiry, the higher the chance of assignment. Sellers managing risk often close ITM short options before expiry to avoid it.

Assignment in the Indian Market

Nifty and BankNifty index options are European-style and cash-settled, so assignment simply means the in-the-money short position is settled in cash at expiry — there is no share delivery to manage. Stock options on NSE, however, are physically settled, so assignment there can mean actual delivery obligations. Knowing the settlement type is essential before writing options.

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