What Is the Process of “Assignment” for a Short Option Position?
Assignment is the obligation for the seller (writer) of an option to fulfill the terms of the contract when the buyer chooses to exercise it. For a short call, the seller is assigned the obligation to sell the underlying asset at the strike price.
For a short put, the seller is assigned the obligation to buy the underlying asset at the strike price. This process is typically managed randomly by the clearing house.
Glossar
Obligation to Buy
Commitment ⎊ An obligation to buy, within cryptocurrency derivatives, represents a legally binding agreement to purchase an underlying asset at a predetermined price and date, frequently arising from options contracts or perpetual swaps.
Obligation to Sell
Agreement ⎊ Within cryptocurrency derivatives and options trading, an obligation to sell represents a contractual commitment arising from a specific market event or condition.
Assignment
Obligation ⎊ Assignment in options trading refers to the mandatory fulfillment of the contract terms imposed upon the option seller, or writer, when the buyer chooses to exercise their right.