What is an Assign
An assign is an act where clearing houses and brokerages select short option and future contract holders to deliver underlying securities. Underlying securities or commodities are delivered to maturing or exercised contract holders.
BREAKING DOWN Assign
An assign is done at random, meaning the counterparty the brokerage selects is done randomly. Not all contracts will typically be exercised or tendered, however. Those that need to be settled with the delivery of the underlying security are randomly assigned to brokerages that, in turn, randomly select which of their clients will be assigned.
During an assignment, the clearinghouse assigns an option writer that will be the required buyer or seller of the underlying contract upon exercise. Again, this is for options or futures contracts.
An assign in investing involves options agreements. Brokerages and clearing houses connect buyers and sellers of options contracts.
For example, the seller and writer of a call option will sell a set number of shares at a set price if the option is exercised. If the option is called, the brokerage assigns a client with a short position, at random, to make delivery of the stock to another client with a long position in the same contract. When the contract is to be delivered is when the brokerage will select the counterparty at random to deliver the asset.
Assign and Options
An assign generally refers to an option contract. Options offer the right but not the obligation to buy an underlying asset at a specific price. American options can be exercised anytime, while European options are only exercised on the option expiration date. If an option is exercised, that’s when an assignment will take place.
When an option is exercised, the option writer, the call seller, in this case, must fulfill the obligations of the contract. In our example, the call writer would be obligated to sell a set number of underlying securities for a set price. Option buyers are invested with the idea underlying security or asset will move one way, while writers are betting on a move in the opposite direction
What is an Assignment?
Broadly speaking, to assign is to transfer rights or property from one person or business to another. An assignment can be any transfer, any sort of rights. An assign generally relates to delivering on options and futures contracts, but can also include transfers of trademarks, bank notes, and other property rights. Mortgage assignments include transferring mortgage deeds, while lease assigns transfers lease contracts.