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Option Exercise vs. Assignment?

Exercise

Exercise is the act by which an option buyer chooses to use the contractual right to buy or sell the underlying asset at the strike price.

Exercise may result in:

  • Delivery of the underlying asset, or
  • Cash settlement, depending on the contract type



Assignment

Assignment occurs when an option seller is notified that they must fulfill the obligation associated with the option contract.

Assignment may occur:

  • At expiration
  • Prior to expiration (for American-style options)

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