Understanding Assignment in Options Trading

What does assignment mean in options?

In options trading, "assignment" refers to the obligation of the option seller to fulfil the terms of the option contract. For call options, this means the seller will have to sell the underlying asset at the strike price. Conversely, for put options, the seller must buy the underlying asset at the strike price. However, in some markets, options contracts are settled in cash, resulting in the seller either making a payment or receiving funds, instead of dealing with the asset itself.

For example, let's say Mr. A sells a call option with a strike price of ₹50. If the market price of the underlying asset rises to ₹55, Alex might get "assigned", which means he'd be obliged to sell the asset at ₹50, even though its current market value is ₹55.