Assignment

The intuition

Writing an option is selling a promise. The buyer paid for the right to a fixed price; the writer took the money and the matching duty. Assignment is the day the duty is enforced. For most of the option's life the writer's exposure is simply the option's price moving against them, which they can escape by buying the option back. Assignment is the point past which that escape no longer exists: the contract has expired in the money and the exchange settles it.

In American-style markets this can happen on any day, which is why writers there watch dividend dates and deep in-the-money positions nervously. In India it cannot. Every listed option is European, so a writer knows exactly when the obligation can fall due: the expiry date, after the close, applied automatically by the clearing corporation.

How assignment settles

Written option, in the money at expiry	Index (Nifty, Bank Nifty, FinNifty, Sensex)	Stock
Written call	Pay (settlement price − strike) × lot in cash	Deliver shares at the strike (lot-size quantity)
Written put	Pay (strike − settlement price) × lot in cash	Receive shares and pay strike × lot in cash
Out of the money	Nothing; option expires worthless	Nothing; option expires worthless

Cash settlement is a debit against margin already held, so an index writer who was properly margined sees no new demand for funds beyond the loss itself. Physical settlement is different: the writer of a stock put must have the full cash for the shares, and the writer of a stock call must have the shares, with delivery margins phased in over the final sessions before expiry to make sure of it.

Worked example (illustrative numbers)

Suppose a trader wrote one lot (65 units) of the Nifty 24,000 put for ₹90 with Nifty at 24,300. Two outcomes at the Tuesday expiry:

• Nifty settles at 24,150. The put is out of the money, expires worthless, and the writer keeps 90 × 65 = ₹5,850. No assignment.
• Nifty settles at 23,700. The put is 300 in the money. The writer is assigned and pays 300 × 65 = ₹19,500 in cash, against the ₹5,850 collected: a net loss of ₹13,650, debited from the margin held.

Now the same idea on a stock: a written 1,000 put on a stock with a lot of 500 shares, settling at 950. Assignment means buying 500 shares at ₹1,000, which is ₹5,00,000 of cash the trader must have, and ending up holding shares worth ₹4,75,000. The ₹25,000 loss is the same economics as the index case; the ₹5,00,000 cash call is what makes physical assignment a different experience.

Why it matters to an options trader

• It is the writer's maximum-risk event. Every writing strategy, from covered calls to iron condors, ends in one of two ways: expiring worthless or being assigned. Knowing which legs could be assigned, and what that costs, is the whole risk plan.
• Stock versus index is a different business. Index assignment is a cash loss you were margined for. Stock assignment is a delivery event that needs funds or shares, and brokers may square off positions they consider unfunded.
• Timing is certain on NSE. With no early assignment, writers can hold positions through dividends and sharp moves knowing the obligation lands only at expiry.
• Spreads protect only if both legs survive. A written put hedged by a bought lower put is assigned on one leg and exercised on the other; the net is the spread's maximum loss, but on stocks both legs may involve delivery.

Common mistakes

• Holding in-the-money stock options into expiry by accident. The delivery obligation and the margins that precede it surprise traders who thought of options as cash instruments.
• Assuming a small in-the-money amount means a small settlement. On a stock put the cash required is the full strike times the lot, not the intrinsic value.
• Expecting the broker to close positions for you. Some do, at their discretion and timing; relying on it is not a plan.
• Worrying about early assignment on NSE. It cannot happen; the energy is better spent on the expiry-day plan.
• Forgetting STT on exercise. An option that settles in the money attracts Securities Transaction Tax on its intrinsic value (0.15% from 1 April 2026), which can make closing in the market cheaper than being assigned on a thin position.

Indian-market specifics

• All listed options are European; assignment is automatic at expiry for in-the-money contracts.
• Index options are cash-settled against the final settlement price; stock options have been physically settled since 2019 (NSE's phased move completed that year), with delivery margins phased in over the last sessions before expiry.
• Expiry days: Nifty Tuesday (weekly and monthly); Bank Nifty, FinNifty, Midcap Select and stocks on the last Tuesday; Sensex Thursday on BSE.
• Lot sizes after the January 2026 revision: Nifty 65, Bank Nifty 30, FinNifty 60, Sensex 20; stock lots vary by stock and determine the delivery quantity.

FAQ

Can I be assigned before expiry on NSE?

No. Assignment happens only at expiry, automatically, for in-the-money contracts.

What happens when a written index option is assigned?

The writer pays the intrinsic value in cash per unit, times the lot size.

What happens when a written stock option is assigned?

Shares are delivered or received at the strike; the writer needs the shares or the full cash.

How do writers avoid assignment?

Buy the option back or roll it before the expiry session ends.

Related terms

• Expiry, the only assignment date
• European Option, why there is no early assignment
• Margin, including delivery margin
• Put Option, the written put in the example