Exercise and Assignment

Jellifin
Jellifin
Aug 24, 2017 · 3 min read

Understanding the concepts of exercise and assignment are essential to comprehending the options trading process from start to finish.

Let’s start out with the exercise process. Exercising can be associated with going long on a call or put. Assignment can be associated with going short on a call or put.

So what do these two terms really mean? We’ll start out with the options exercising process.

When the buyer of a long call or put uses their right to buy (in the case of a call) or sell (in the case of a put), he or she must let the seller of the option contract know first, which is called an exercise notice. At that time, the seller is obligated to deliver the underlying shares to the buyer at the agreed upon price.

Although most options traders do not exercise their options and instead either allow their contracts to expire worthless or close them out, it is still important to know what happens during the exercising process to get the big picture.

Put options are different than calls in that they require a traditional margin account in order to exercise them, which is not a feature that we currently offers at this time but plans to offer in the future. Check out our disclosures page under fees to get a better idea of the costs related to exercising an option.

Now let’s take a look at the assignment process. Assignment is basically the flip side of the coin from exercising and takes place on the seller’s side. It happens when someone who is short a call or put is forced to sell (in the case of a call) or buy (in the case of a put) the stock.

Unlike exercising, the assignment process is an obligation, not a right. The seller must deliver, or “assign,” the underlying shares at the stated strike price when the buyer requests it.

Remember, you must have a current cash balance that is high enough to cover exercising an option or the contract will experience worthless. If you do have enough cash to perform the options exercise, shares will be assigned to your account and you’ll be able to sell those shares at a later date. There will be no fees to sell those shares.

We hope that these two concepts are now a little easier to wrap your head around.

Make sure to check out our blog to learn about additional options concepts. Don’t forget to get in line for early access to our iOS app here.


Jellifin is an options trading platform. Customers can trade U.S. equity options commission free. To learn more visit Jellifin.com or download the app directly from the Apple App Store.


Financial market data and brokerage services provided by Third Party Trade LLC, Member FINRA & SIPC. Third Party Trade LLC is a subsidiary of Third Party Technologies Inc. Check the background of Third Party Trade LLC on FINRA’s BrokerCheck. Jellifin Financial, Inc. is NOT a broker-dealer or investment advisor.
Jellifin does not provide investment, tax, or legal advice. Electronic trading poses unique risk to investors. System response and access times may vary due to market conditions, system performance and other factors. Options involve risk and are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially significant losses. Please read Characteristics and Risks of Standardized Options before deciding to invest in options. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. An investor should understand these and additional risks before trading. For additional questions, please contact our customer service department at support@jellifin.com. For all brokerage related questions, please contact Third Party Trade LLC at support@thirdpartytrade.com.

Jellifin

Commission-Free Stocks & Options Trading

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Jellifin

Written by

Jellifin

Commission-free stocks & options trading.

Jellifin

Jellifin

Commission-Free Stocks & Options Trading

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