You woke up short 100 shares you never sold

Your short option was assigned early because someone holding the same contract exercised it before expiry. Nearly all US stock and ETF options are American-style, so the owner can exercise on any trading day. The clearing system then hands that exercise to a short holder, and this time it reached you.

Owners rarely do this without a reason. Exercising throws away whatever time value is left in the contract, so selling usually pays more.

So early assignment clusters in two spots. The first is an in-the-money short call the day before the stock goes ex-dividend. The second is any short option so deep in the money that almost no time value remains. If your position sat in either spot, the assignment was predictable. It felt random because nobody showed you the math.

A call owner gets no dividend. A shareholder does, as long as they hold the stock before the ex-dividend date. That gap is the whole incentive.

On the last trading day before the ex-date, the call owner weighs two costs. If they keep the call, the stock should open lower by about the dividend, and the call drops with it. If they exercise, they collect the dividend but give up the time value left in the call. When the dividend is the bigger number, exercising wins.

You find out the next morning, usually before the open. You were short the call, so you're now short 100 shares per contract at the strike. Because you're short the stock over the ex-date, you also owe the dividend. That payment leaves your account even when the trade was a spread with a defined loss on paper.

Here's a worked example with made-up numbers. A stock trades at 52.40 the day before it goes ex-dividend. The dividend is 0.40 per share. You're short the 50 call, quoted at 2.55.

Intrinsic value is 52.40 minus 50, or 2.40. Time value is the rest: 2.55 minus 2.40, or 0.15. Now take the owner's side. Holding through the ex-date costs them about 0.40 as the stock drops. Exercising costs them the 0.15 of time value instead. Giving up 0.15 to save 0.40 is an easy choice, so expect assignment.

Now give the same call more time and a quote of 3.10. Time value is 0.70, larger than the dividend. Holding beats exercising, and your risk falls a lot. It never reaches zero, because some owners exercise for their own reasons.

The rule of thumb is short. When the time value left is smaller than the dividend, plan on being assigned.

Assignment turns an option into a stock position overnight. What you end up holding depends on which leg was assigned.

An assigned short call means you sold 100 shares per contract at the strike. If you owned the shares, as in a covered call, they're gone and you keep the cash. If you didn't own them, you're now short the stock.

An assigned short put means you bought 100 shares per contract at the strike. The cash or margin to pay for them is taken from your account straight away.

In a spread, your long option is still there and still caps the loss. Your risk is roughly what it was before. The account is what changes. A large stock position can trigger a margin call. An owed dividend is a cost the spread's maximum loss never counted. Deep in-the-money short puts carry the same early risk, with interest rather than a dividend behind it.

Read the assignment notice and write down the share count and the strike. Check your positions to see whether you're now long or short the stock. Look at your buying power before the open so a margin call doesn't surprise you.

If you're in a spread, check what your long option is quoted at. Price out selling that option against exercising it. Selling usually wins, because exercising throws away the long option's own time value.

Place the closing trades as a pair, the stock and the long option, close together in time. If you're short shares, buy them back rather than waiting for the stock to come to you. Assigned on a put you'd happily own? Decide whether to keep the shares, and write that down.

Check the next statement for the dividend charge or interest cost. Then note the date and the setup that caused it, so the next trade starts with that check.

Check the ex-dividend date before you sell any call on a dividend stock. Is your short call in the money with time value below the dividend? Close it or roll it before that date. Rolling to a later expiry adds time value back, which removes the owner's reason to exercise.

Watch short options that have gone deep in the money near expiry. Once the time value is a few cents, there's little reason for the owner to keep holding. Closing a few days early costs less than handling a surprise stock position.

If you want no early assignment at all, look at index options such as SPX. They're European-style and cash-settled, so they can only be exercised at expiry and settle in cash. That rule is set by the contract, so check the contract specs for any product you trade.