What is the meaning of “Exercise” and “Assignment” in the context of an options contract?

The owner of an options contract has the right to exercise the contract, let it expire worthless, or sell it back into the market before expiration. The owner of the contract is likely to exercise the contract if it’s “in the money.” On the other hand, the person who sold the contract to collect the premium is assigned when the owner of the contract exercises it.

Rights and Obligations

The owner has the right to exercise the contract or not, whereas the seller has the obligation to make good on the contract if he/she’s assigned. When the owner of the contract exercises it, the seller is assigned.