29fintechM

Assignment explained - 04 - Option assignment cheat sheet: what to watch, when to act, and how to respond

Options 10 minutes to read
MicrosoftTeams-image (3)
Koen Hoorelbeke

Investment and Options Strategist

Option assignment cheat sheet: what to watch, when to act, and how to respond

This article is the final entry in our four-part series on option assignment. It condenses key lessons from the previous articles into one practical reference. Whether you're an investor using covered calls and puts or a trader managing spreads and multi-leg strategies, this article helps you recognize risk, avoid surprises, and make assignment work for you.

This is part 4: Option assignment cheat sheet.


What is assignment?

Assignment occurs when the buyer of an option exercises it. If you’ve sold that option, you may be required to deliver (calls) or buy (puts) 100 shares per contract. Assignment can happen any time an option is in the money, but it’s most common when there is little or no time value (extrinsic value) remaining.

Assignment does not happen during the trading session. It’s processed after the market closes and is reflected in your account the next morning. This is explained in detail in Part 1.


When is assignment likely?

Assignment risk rises when:

  • The option is in the money
  • There’s very little extrinsic (time) value left (typically under €0.10)
  • For calls: there’s an upcoming dividend and time value is less than the dividend
  • It’s the final day or two before expiration

There is no assignment risk if the option is out of the money. Exercising in that case would lose the buyer money.

To estimate extrinsic value:

  • For calls: Intrinsic value = max(0, underlying – strike)
  • For puts: Intrinsic value = max(0, strike – underlying)
  • Extrinsic value = Option price – Intrinsic value

What to watch before expiry

  • A call you’ve sold is trading for nearly the dividend amount or less
  • A short put is trading for just a few cents of time value
  • A short leg of a spread is deep in the money and expiry is near

These are often signs that assignment may happen that evening. Consider closing or rolling the position before the close.


How to avoid assignment

  • Close or roll early when extrinsic value drops below €0.10
  • Track dividends if you're short calls—close or roll before the ex-dividend date
  • Check all short options one to two days before expiry
  • Don’t worry about intraday moves—assignment only happens after the close

How to handle assignment when it happens

When you are assigned, these follow-up strategies apply:

  • Short put assigned → you now hold shares. You can sell covered calls, hedge with a long put, or continue to hold the shares.
  • Short call assigned (in a covered call) → your shares are sold at the strike. Profit is locked in.
  • Short leg of a vertical spread assigned → use the long leg to flatten the position, or restructure it.
  • In spreads like condors or butterflies → assess whether to close the remaining legs or use them to reposition.
  • Synthetic long position (short put and long call) → if the put is assigned, you now own shares. You still hold the long call. Nothing changes in your directional exposure.

Summary flow

  1. Are you short an option? If yes:
  2. Is it in the money? If yes:
  3. Does it have less than €0.10 of extrinsic value? If yes: → Assignment is likely. → Close, roll, or prepare to manage the assigned position.

If the answer is no to any of the above, assignment risk is low.


For deeper context, explore:

  • Part 1: Assignment explained – what every options trader and investor should know
  • Part 2: How to avoid assignment in options trading
  • Part 3: How to use option assignment to your advantage

Quarterly Outlook

01 /

  • Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally

    Quarterly Outlook

    Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity

    Quarterly Outlook

    Q3 Macro Outlook: Less chaos, and hopefully a bit more clarity

    John J. Hardy

    Global Head of Macro Strategy

    After the chaos of Q2, the quarter ahead should get a bit more clarity on how Trump 2.0 is impacting...
  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900 Hellerup
Denmark

Contact Saxo

Select region

International
International

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.