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REDDIT

Is it possible to be forced to exercise after buying a deep ITM call option?

C
Feb 23, 2025 · 06:19

I was learning about options via chatgpt (probably not the best idea), and it was talking about the risk of early assignment potentially causing me to have to buy shares. I asked it why would I be forced to buy shares when the entire point of an options contract is to have the OPTION? It explained how early assignment works, and said "your contract is directly linked to the assigned seller’s obligation. If they get assigned and no longer hold their obligation, the clearinghouse has to settle your contract too."

Is this true? If the option writer who sold me a contract gets assigned, I am forced to buy the shares too in order to clear the contract? This just seems to contradict the entire point of an options contract.

So, is chatgpt wrong, or am I misunderstanding something?

Thanks.