What does assignment mean in options?
In options trading, "assignment" refers to the process where an option seller is required to fulfill the obligation specified in the options contract. This typically happens when the buyer of the option decides to exercise their right before or at expiry.
How Does Assignment Work?
- Call Option Assignment: The seller must sell the underlying asset at the strike price, regardless of the current market price.
- Put Option Assignment: The seller must buy the underlying asset at the strike price, even if the market price is lower.
In Indian markets, many options contracts are cash-settled, which means the seller doesn’t physically deliver or receive the asset—instead, the difference between the strike price and the market price is credited or debited in cash.
Example:
Mr. A sells a call option with a ₹50 strike price.
If the market price rises to ₹55, and the buyer exercises the option:
- Mr. A gets assigned and must sell the asset at ₹50
- Even though it's trading at ₹55 in the market, he must honor the ₹50 strike price
What if...
| Scenario | Outcome |
|---|
| You sold an ITM call option at expiry | You will be assigned and must sell the underlying or settle in cash |
| You sold an OTM put option | It expires worthless; no assignment occurs |
| The option is cash-settled | No actual buying or selling—just the net price difference is adjusted in your account |
Tip: In India, index options are cash-settled while stock options are physically settled—know the difference to manage assignment risk.
Last updated: 27 Jun 2025
Related Articles
Does the seller of the option have control over assignment?
No, the seller (also called the option writer) does not have any control over the assignment process. Assignments are entirely managed and decided by the exchange through a random process, once the option buyer exercises the contract. How Does ...
Does MTM settlement apply to options trading?
No, the Mark to Market (MTM) settlement process does not apply to options contracts. MTM settlement is a mechanism used for futures contracts, where the daily gains and losses are calculated and settled based on the market price of the underlying ...
Is trading in Far OTM options possible on FYERS?
Yes, FYERS provides the ability to trade Far Out-of-The-Money (OTM) options with a broad strike price range. You can buy and sell options contracts that are far from the current market price, depending on the type of asset (Index or Stock). Options ...
Why can't I use the options premium received from selling the options contract?
If you've sold an options contract and noticed that the premium received isn’t available for trading, it’s due to updated regulations from the exchange. These rules ensure better risk management by temporarily restricting access to premiums from ...
How is options trading different from trading futures?
While both options and futures are derivative instruments used for hedging and speculation, they have distinct characteristics that differentiate them in terms of obligations, profit/loss potential, and pricing. Key Differences Between Options and ...