How Does Option Assignment Work?

By strict definition, this term basically means the transfer of a person’s rights to another person or business.  In terms of stock options, it refers to a notice given to an option writer that states the option (that was sold to a buyer) has officially been exercised.  Exercised as in executed, not exorcised, which would have an entirely different meaning.  Whenever a seller has been assigned then he or she is obligated to finish the requirements as stated in the option.  For instance, if the option was a call then the writer/seller of the option would have to sell the security at the agreed upon price.

 When the holder of an option wants to exercise the option he/she notifies his/her broker. The broker will notify the Options Clearing Corporation (OCC) of the event.  After this, OCC fulfills the rest of the contract and then selects a firm that happened to be [...]