Exercise And Assignment Mechanics

When an option holder decides to exercise, they notify their broker, who submits the exercise instruction to the Options Clearing Corporation (OCC) by that day's cutoff. The OCC doesn't match the exercising holder to any specific option writer directly — instead, it runs a random assignment process across all open short positions in that exact contract (same underlying, strike, and expiry), so any writer of that contract has some chance of being assigned, regardless of when they originally sold it or which broker they use.

This randomness is exactly why a short option position always carries assignment risk that can't be eliminated except by closing the position: a trader who is short a call has no control over whether or when they get assigned, and if assigned, wakes up with a short stock position (for a call) or a long stock position (for a put) that they didn't explicitly choose to take on that day. American-style options can be exercised any day up to expiry, so this risk exists throughout the option's life, not just at expiration; European-style options can only be exercised at expiry, which removes early-assignment risk entirely.

The classic trigger for early exercise is a dividend: a call holder deep in the money may exercise just before an ex-dividend date to capture the dividend on the newly acquired stock, since holding the option through the dividend gets no such payment. A short call writer who ignores upcoming dividends on positions likely to be in the money is the one most exposed to being assigned right when it's least convenient.