Assignment
What happens to an option seller when a holder exercises: the seller is obligated to deliver shares (short call) or buy shares (short put) at the strike. Assignment is allocated to short positions effectively at random by the OCC and brokers.
Assignment is not a penalty — it is the seller’s side of the contract working as designed. A covered-call writer who is assigned simply sells shares at the strike; a cash-secured-put writer buys them.
Early assignment on American-style options is uncommon while meaningful extrinsic value remains, but it becomes likely for deep in-the-money short calls ahead of dividends. Sellers who cannot comfortably handle assignment are sized wrong, not unlucky.
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