What Is the Risk of “Early Assignment” When Selling a Call Option in a Collar?

Early assignment is the risk that the buyer of the short call option in the collar exercises their right before the expiration date. This risk exists only for American-style options.

If assigned, the hedger is forced to sell the underlying asset at the call's strike price, prematurely ending the upside potential and potentially terminating the entire hedged position before the intended time horizon.