The word "assignment" scares a lot of beginners, but it is simple. Below, using TSLA at a $420 spot, is exactly who does what at expiration - and why a bought option can never cost you more than the premium you paid.
Exercise
The BUYER uses their right
When you buy a call or put, you own a right, never an obligation. To exercise is to choose to use it - to buy shares (call) or sell shares (put) at the strike. You decide. If it is not worth it, you simply let it expire and walk away.
Assignment
The SELLER is obligated to deliver
When you sell (write) an option, you take on an obligation. If the buyer exercises, you are assigned - required to deliver your side of the deal: hand over 100 shares at the strike (call) or buy 100 shares at the strike (put). You keep the premium either way.
The four cases at expiration (strike $420, TSLA):
1. You BUY a call
You hold a right · you choose
ITMAbove $420: exercise to buy 100 shares at $420, or (simpler) just sell the call for its value and take the cash. Your call is worth money.
OTMAt or below $420: it expires worthless. You lose only the premium you paid - nothing more.
2. You BUY a put
You hold a right · you choose
ITMBelow $420: exercise to sell 100 shares at $420, or (simpler) just sell the put for its value. Your put is worth money.
OTMAt or above $420: it expires worthless. You lose only the premium you paid - nothing more.
3. You SELL a covered call
You have an obligation · you own the 100 shares
ITMAbove $420: you are assigned. Your 100 shares are sold at $420 and you keep the premium. You capped your upside but got paid to do it.
OTMAt or below $420: no assignment. The call expires, you keep the premium and keep your 100 shares.
4. You SELL a cash-secured put
You have an obligation · cash set aside to buy
ITMBelow $420: you are assigned. You buy 100 shares at $420 using your set-aside cash and keep the premium, which lowers your true cost.
OTMAt or above $420: no assignment. The put expires, you keep the premium and keep your cash.
Try it: what happens to you at expiration?
$360strike $420$480
In the money
Result
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Net dollar outcome
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One thing to remember: when you buy an option, your maximum loss is always just the premium you paid, no matter how the assignment lands - you can only lose 100% of a small, known cost. The kind of assignment that can cost you far more than you put in comes from selling naked (uncovered) options, where you have no shares and no set-aside cash behind the obligation. This site does not teach naked selling - every seller position here is covered or cash-secured.
Plain English
Three things to know about assignment:
Buyers choose, sellers get chosen. Only the option seller can be assigned. As a buyer you are never forced into anything - you exercise if you want to, or let it expire.
Assignment happens when the option is in the money at expiration. An out-of-the-money option just expires - no exercise, no assignment - and the seller simply keeps the premium.
Covered and cash-secured means no surprise bill. A covered call already owns the 100 shares to deliver; a cash-secured put already holds the cash to buy. Assignment is planned, not a disaster - and a bought option risks only its premium.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.