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Trading Options: Understanding Assignment

The options market can seem to have a language of its own. To the average investor, there are likely a number of unfamiliar terms, but for an individual with a short options position—someone who has sold call or put options—there is perhaps no term more important than " assignment "—the fulfilling of the requirements of an options contract.

Options trading carries risk and requires specific approval from an investor's brokerage firm. For information about the inherent risks and characteristics of the options market, refer to the Characteristics and Risks of Standardized Options also known as the Options Disclosure Document (ODD).

When someone buys options to open a new position ("Buy to Open"), they are buying a right —either the right to buy the underlying security at a specified price (the strike price) in the case of a call option, or the right to sell the underlying security in the case of a put option.

On the flip side, when an individual sells, or writes, an option to open a new position ("Sell to Open"), they are accepting an obligation —either an obligation to sell the underlying security at the strike price in the case of a call option or the obligation to buy that security in the case of a put option. When an individual sells options to open a new position, they are said to be "short" those options. The seller does this in exchange for receiving the option's premium from the buyer.

Learn more about  options from FINRA or access free courses like Options 101 at OCC Learning .

American-style options allow the buyer of a contract to exercise at any time during the life of the contract, whereas European-style options can be exercised only during a specified period just prior to expiration. For an investor selling American-style options, one of the risks is that the investor may be called upon at any time during the contract's term to fulfill its obligations. That is, as long as a short options position remains open, the seller may be subject to "assignment" on any day equity markets are open. 

What is assignment?

An option assignment represents the seller's obligation to fulfill the terms of the contract by either selling or buying the underlying security at the exercise price. This obligation is triggered when the buyer of an option contract exercises their right to buy or sell the underlying security.

To ensure fairness in the distribution of American-style and European-style option assignments, the Options Clearing Corporation (OCC), which is the options industry clearing house, has an established process to randomly assign exercise notices to firms with an account that has a short option position. Once a firm receives an assignment, it then assigns this notice to one of its customers who has a short option contract of the same series. This short option contract is selected from a pool of such customers, either at random or by some other procedure specific to the brokerage firm. 

How does an investor know if an option position will be assigned?

While an option seller will always have some level of uncertainty, being assigned may be a somewhat predictable event. Only about 7% of options positions are typically exercised, but that does not imply that investors can expect to be assigned on only 7% of their short positions. Investors may have some, all or none of their short positions assigned.

And while the majority of American-style options exercises (and assignments) happen on or near the contract's expiration, a long options holder can exercise their right at any time, even if the underlying security is halted for trading. Someone may exercise their options early based upon a significant price movement in the underlying security or if shares become difficult to borrow as the result of a pending corporate action such as a buyout or takeover. 

Note: European-style options can only be exercised during a specified period just prior to expiration. In U.S. markets, the majority of options on commodity and index futures are European-style, while options on stocks and exchange-traded funds (ETF) are American-style. So, while SPDR S&P 500, or SPY options, which are options tied to an ETF that tracks the S&P 500, are American-style options, S&P 500 Index options, or SPX options, which are tied to S&P 500 futures contracts, are European-style options.

What happens after an option is assigned?

An investor who is assigned on a short option position is required to meet the terms of the written option contract upon receiving notification of the assignment. In the case of a short equity call, the seller of the option must deliver stock at the strike price and in return receives cash. An investor who doesn't already own the shares will need to acquire and deliver shares in return for cash in the amount of the strike price, multiplied by 100, since each contract represents 100 shares. In the case of a short equity put, the seller of the option is required to purchase the stock at the strike price.

How might an investor's account balance fluctuate after opening a short options position?

It is normal to see an account balance fluctuate after opening a short option position. Investors who have questions or concerns or who do not understand reported trade balances and assets valuations should contact their brokerage firm immediately for an explanation. Please keep in mind that short option positions can incur substantial risk in certain situations.

For example, say XYZ stock is trading at $40 and an investor sells 10 contracts for XYZ July 50 calls at $1.00, collecting a premium of $1,000, since each contract represents 100 shares ($1.00 premium x 10 contracts x 100 shares). Consider what happens if XYZ stock increases to $60, the call is exercised by the option holder and the investor is assigned. Should the investor not own the stock, they must now acquire and deliver 1,000 shares of XYZ at a price of $50 per share. Given the current stock price of $60, the investor's short stock position would result in an unrealized loss of $9,000 (a $10,000 loss from delivering shares $10 below current stock price minus the $1,000 premium collected earlier).

Note: Even if the investor's short call position had not been assigned, the investor's account balance in this example would still be negatively affected—at least until the options expire if they are not exercised. The investor's account position would be updated to reflect the investor's unrealized loss—what they could lose if an option is exercised (and they are assigned) at the current market price. This update does not represent an actual loss (or gain) until the option is actually exercised and the investor is assigned. 

What happens if an investor opened a multi-leg strategy, but one leg is assigned?

American-style option holders have the right to exercise their options position prior to expiration regardless of whether the options are in-, at- or out-of-the-money. Investors can be assigned if any market participant holding calls or puts of the same series submits an exercise notice to their brokerage firm. When one leg is assigned, subsequent action may be required, which could include closing or adjusting the remaining position to avoid potential capital or margin implications resulting from the assignment. These actions may not be attractive and may result in a loss or a less-than-ideal gain.

If an investor's short option is assigned, the investor will be required to perform in accordance with their obligation to purchase or deliver the underlying security, regardless of the overall risk of their position when taking into account other options that may be owned as part of the overall multi-leg strategy. If the investor owns an option that serves to limit the risk of the overall spread position, it is up to the investor to exercise that option or to take other action to limit risk. 

Below are a couple of examples that underscore how important it is for every investor to understand the risks associated with potential assignment during market hours and potentially adverse price movements in afterhours trading.

Example #1: An investor is short March 50 XYZ puts and long March 55 XYZ puts. At the close of business on March expiration, XYZ is priced at $56 per share, and both puts are out of the money, which means they have no intrinsic value. However, due to an unexpected news announcement shortly after the closing bell, the price of XYZ drops to $40 in after-hours trading. This could result in an assignment of the short March 50 puts, requiring the investor to purchase shares of XYZ at $50 per share. The investor would have needed to exercise the long March 55 puts in order to realize the gain on the initial multi-leg position. If the investor did not exercise the March 55 puts, those puts may expire and the investor may be exposed to the loss on the XYZ purchase at $50, a $10 per share loss with XYZ now trading at $40 per share, without receiving the benefit of selling XYZ at $55.

Example #2: An investor is short March 50 XYZ puts and long April 50 XYZ puts. At the close of business on March expiration, XYZ is priced at $45 per share, and the investor is assigned XYZ stock at $50. The investor will now own shares of XYZ at $50, along with the April 50 XYZ puts, which may be exercised at the investor's discretion. If the investor chooses not to exercise the April 50 puts, they will be required to pay for the shares that were assigned to them on the short March 50 XYZ puts until the April 50 puts are exercised or shares are otherwise disposed of.

Note: In either example, the short put position may be assigned prior to expiration at the discretion of the option holder. Investors can check with their brokerage firm regarding their option exercise procedures and cut-off times.

For options-specific questions, you may contact OCC's Investor Education team at [email protected] , via chat on OptionsEducation.org or subscribe to the OIC newsletter . If you have questions about options trading in your brokerage account, we encourage you to contact your brokerage firm. If after doing so you have not resolved the issue or have additional concerns, you can contact FINRA .

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What Is a Short Call?

How a short call works, short calls vs. long puts, the bottom line.

• Options and Derivatives
• Strategy & Education

What Is a Short Call in Options Trading, and How Does It Work?

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

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A short call is an options trading strategy that involves a trader selling (or "writing) a call option with the expectation that the price of the underlying asset will drop. The option buyer, meanwhile, is betting that the price will rise.

Two outcomes are possible:

• If the price drops, the transaction will not be completed but the seller of the short call seller will pocket the premium for the options contract. The premium is based on the market value of the underlying asset.
• If the price increases, the buyer of the short call will complete the transaction and collect the difference between the options price and the current market price of the underlying stock.

Short calls have limited profit potential and the theoretical risk of unlimited losses. They're usually used only by experienced traders and investors who specialize in options trading.

Key Takeaways

• A call option gives the buyer of the option the right but not the obligation to purchase underlying shares at the strike price before the contract expires.
• When a trader sells a call option, the transaction is called a short call.
• A short call is a bearish trading strategy, reflecting a bet that the security underlying the option will fall in price.
• The goal of the trader who sells a call is to make money from the premium and see the option expire worthless.

A short call is a bearish trading strategy . The option seller, who is called the writer, believes that the price of the stock underlying the option will decrease.

Calls give the buyer of the option the right to buy the underlying security at a specified price (called the strike price ) before the option contract expires.

The writer of the call option receives a premium paid by the buyer. The writer must deliver the underlying shares to the call buyer if the buyer exercises the option.

What Happens Next

The success of the short call strategy rests on the option contract expiring worthless. That way, the trader banks the profit from the premium.

For this to happen, the price of the underlying security must fall below the strike price. If it does, the buyer won't exercise the option.

If the price rises, the option will be exercised because the buyer can get the shares at the strike price and immediately sell them for a profit at the higher market price.

The Seller's Risk

For the seller, there’s unlimited exposure during the length of time the option is viable. The underlying stock's price could rise above the strike price at any time until the expiration date. The option would then be exercised.

Once that happens, the seller must buy the shares at the current price. That price could potentially be much higher than the strike price that the buyer will be paying.

A call by a seller who doesn't already own the underlying shares of an option is selling a naked short call. To limit losses, some traders will exercise a short call while owning the underlying security. This is known as a covered call .

The alternative is to close out their naked short position, accepting a loss that's less than what they'd lose if the option were assigned (exercised).

Example of a Short Call

Say that shares of Humbucker Holdings are in a strong uptrend and are trading near $100 per share. However, a trader believes that Humbucker is overvalued and will fall to $50 a share.

With that in mind, the trader sells a call with a strike price of $110 and a premium of $1. The trader will receive a net premium credit of $100 ($1.00 x 100 shares).

The price of Humbucker stock does indeed drop. The calls expire worthless and unexercised. The trader gets the full amount of the premium as profit. The strategy worked.

When the Strategy Fails

However, it could go the other way. Humbucker share prices could continue moving up. This creates a theoretically limitless risk for the call writer.

For example, say the shares move up to $200 within a few months. The call holder exercises the option and buys the shares at the $90 strike price. T

he shares must be delivered to the call holder. The call writer must buy 100 shares at the current market price of $200 per share. This is the trader's result:

Buy 100 shares at $200 per share = $20,000

Receive $90 per share from buyer = $9,000

Loss to trader is $20,000 - $9,000 = ($11,000)

Trader applies $100 premium received for a total loss of ($10,900)

Short calls can be extremely risky due to the unlimited potential for loss if the short call writer has to buy the shares that must be delivered.

A short call strategy is one of two basic bearish strategies involving options. The other is buying puts .

Put options give the holder the right to sell a security at a certain price within a specific time frame. Going long on puts, as traders say, is also a bet that prices will fall, but the strategy works differently.

Say that our trader still believes Humbucker stock is headed for a fall. The trader will buy a put with a $90 strike price for a $1.00 premium. The trader spends $100 for the right to sell shares at $90 even if the actual market price falls to $50.

Of course, if the stock does not drop below $90, the trader will have lost the premium paid for the protection.

Why Is It Called a Short Call?

Short in this case refers to a trading strategy that relies on the expectation that an asset will decrease in price. These traders are "selling it short."

Every short seller needs someone on the buy side who has the opposite view. The buyer will profit only if the price increases.

Why Would Someone Sell Call Options?

If the trader who sells a call option is correct and the price of the underlying asset decreases, the contract will expire and the transaction will not be completed. But the trader will keep the premium paid by the buyer for the contract.

What's a Naked Short?

In a naked short, the trader sells a call option without already owning shares of the option's underlying stock. If the stock increases in price during the term of the options contract, the buyer will exercise the option. That means the seller must buy shares of the stock in the open market and turn them over to the buyer. In return, they'll receive the strike price, which will be much lower.

The writer of a short option is making a bet that the stock underlying the option will decline in price before the option expires. Win or lose, the writer collects a premium, or fee, for selling the option. But losing this bet can mean unlimited losses for the writer. The option buyer is owed a number of shares of that stock at the current market price.

Options trading in general is best left to the professionals who dominate this market.

U.S. Securities and Exchange Commission. " Investor Bulletin: An Introduction to Options ."

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• Short Call P&L Diagram
• Short Call Example

How to Sell a Naked Call

Short call options strategy explained: learn the basics.

• Selling an uncovered call is a bearish strategy that can benefit when the stock remains below the short call's strike price or falls.
• Like other short premium options strategies, uncovered call sellers benefit from time decay, which can erode the option's value, allowing the investor to buy it back to close at a lower price to yield a potential profit.
• A short call can be a more capital-efficient way of gaining short exposure to a specific underlying without having to short shares outright.
• The maximum profit for a naked call is the initial credit received.
• The max loss for an uncovered call is unlimited since the underlying, in theory, can rise infinitely.

Short Call Option

A short call is a neutral to bearish options trading strategy that involves selling a call contract at a strike, typically at or above the current market price of a stock. The short call strategy also goes by other names, including bear call, naked call, and uncovered call.

Selling a naked call can be an alternative method of gaining bearish exposure to a particular underlying without shorting shares outright. Investors can sell to open out-of-the-money (OTM) or in-the-money (ITM) call(s) when establishing a short call position.

The ideal scenario when selling OTM uncovered calls is when the underlying does not breach or approach the short call’s strike price over the life of the trade and expires worthless. This allows the call to erode all of its extrinsic value by the expiration of the contract to yield maximum profit. However, when selling ITM naked calls, investors require a much larger downward price move so the option goes OTM and, ideally, expires worthless to yield a maximum profit.

In-the-money (ITM) calls are usually worth more than out-of-the-money (OTM) calls because they have intrinsic value and usually extrinsic value as well. Intrinsic value describes an option's immediate value for being ITM, which is the difference between the underlying price and the strike. An option's extrinsic value depends on several factors, such as time left to expiration and implied volatility. Although short ITM calls are usually more valuable than short OTM calls and may yield greater profits if the underlying moves down, reducing the value of the call itself, they come with greater risks.

Since short calls synthetically provide bearish exposure to a specific underlying, there may be additional risks associated with holding a short call position. While ITM options generally have higher (early) assignment risk than OTM options, some situations can increase the chance of early assignment on a short call, such as dividend risk if the underlying pays one, hard-to-borrow fees when there is heightened short interest, and theoretical unlimited losses of holding short shares after assignment. When an investor is short a call, it can convert to 100 short shares per contract before expiration if assigned, and the investor will assume the risk of short shares after assignment. This risk still applies to short calls that are not assigned as it represents the theoretical equivalent of 100 shares of short stock.

Like other short option strategies, time decay can help erode an OTM call option's value when the underlying price remains stable and doesn't approach the short call option's strike price.

Maximum profit occurs when a short call remains out of the money until expiration and expires worthless. Investors do not have to wait until the contract expires to close the position. Profit can also occur when an investor buys (covers) the short call back before it expires at a price lower than it was sold for. On the contrary, an investor can incur a loss when buying back a short call at a higher price than it was sold for.

Uncovered calls are only allowed in a margin account with the highest trading level, "The Works." Eligible IRA holders must enable "IRA The Works" to sell naked calls in an IRA. Naked or uncovered calls are held at higher margin requirements in an IRA than in a non-IRA. Additionally, IRAs cannot establish or maintain a short stock position if assigned. As a result, investors assigned short shares in an IRA will receive a Short Restricted [Margin] Call and must close the position after assignment. Please visit the tastytrade Help Center to learn more about Short Restricted Strategy (SL) Calls.

Learn more about options

Expiration Risk for Naked Calls

Options that expire in the money by $0.01 or more are auto-exercised, resulting in an assignment of 100 short shares of stock for each ITM short call.

Moreover, any options strategy involving short options, including a naked short call, may face after-hours risk on the day of expiration. In summary, although the short call may have expired OTM based on the closing price of the underlying, an OTM short call option can become ITM based on any extreme upward price movement after the market close, resulting in an unexpected assignment of short shares. As a result, the investor would assume the risk of 100 short shares per contract assigned, which theoretically has unlimited risk. The only way to eliminate after-hours risk is by closing any short options positions before expiration.

It's crucial to have a plan, like closing or rolling the position before expiration, if a short share assignment is not part of your strategy. Please visit the  tastytrade Help Center  to learn more about Expiration Risk, including more about pin risk and after-hours risk.

Profit & Loss Diagram of a Short/Naked Call

A short/naked call can achieve a maximum profit if it expires OTM and is worthless, as illustrated in the flattened green shaded area below. Naked calls can potentially remain profitable if the underlying remains below the breakeven price, as shown where the red and green zones converge on the x-axis. This is why the short call is said to be neutral to bearish, as opposed to a purely bearish strategy like shorting shares of stock. When selling options, the max profit on the strategy is the initial credit received. A short call will incur losses if the stock price closes above the breakeven zone at expiration, which is defined as the short call strike plus the credit received upfront for selling the call contract. Please be mindful of assignment risk for ITM short option as assignment can happen at any time up to the expiration date. As always, manage your options positions closely.

Example of a Short Call

XYZ trading @ $45

• Sell to Open -1 XYZ 50-strike call @ $4 credit

Collect a $4 credit ($400 total)

*A short call in a margin or IRA requires our highest trading level, “ The Works ” and “ IRA The Works ,” respectively.

Using the Strategy Menu

• Enter a symbol.
• Navigate to the Trade tab.
• Go to the Table mode.
• Click on an expiration date to expand.
• Click the Strategy menu.
• Locate the option strategy and (from left to right) click each column to display Short, Call, and Go.
• The short call will appear in the expanded expiration as a red bar. Drag the bar up or down to adjust the strike. 
• Go to the order ticket to determine the quantity, price, time-in-force (TIF), etc., before clicking Review and Send. Review everything including commissions and fees before sending the order.

Building it Manually

• Click the bid price on the strike you want to sell . The short call will appear in the expanded expiration as a red bar. Drag the bar up or down to adjust the strike.

All investments involve risk of loss. Please carefully consider the risks associated with your investments and if such trading is suitable for you before deciding to trade certain products or strategies. You are solely responsible for making your investment and trading decisions and for evaluating the risks associated with your investments.

Options involve risk and are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially significant losses. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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Understanding assignment risk in Level 3 and 4 options strategies

E*TRADE from Morgan Stanley

With all options strategies that contain a short option position, an investor or trader needs to keep in mind the consequences of having that option assigned , either at expiration or early (i.e., prior to expiration). Remember that, in principle, with American-style options a short position can be assigned to you at any time. On this page, we’ll run through the results and possible responses for various scenarios where a trader may be left with a short position following an assignment.

Before we look at specifics, here’s an important note about risk related to out-of-the-money options: Normally, you would not receive an assignment on an option that expires out of the money. However, even if a short position appears to be out of the money, it might still be assigned to you if the stock were to move against you just prior to expiration or in extended aftermarket or weekend trading hours. The only way to eliminate this risk is to buy-to-close the short option.

• Short (naked) calls

Credit call spreads

Credit put spreads, debit call spreads, debit put spreads.

• When all legs are in-the-money or all are out-of-the-money at expiration

Another important note : In any case where you close out an options position, the standard contract fee (commission) will be charged unless the trade qualifies for the E*TRADE Dime Buyback Program . There is no contract fee or commission when an option is assigned to you.

Short (naked) call

If you experience an early assignment

An early assignment is most likely to happen if the call option is deep in the money and the stock’s ex-dividend date is close to the option expiration date.

If your account does not hold the shares needed to cover the obligation, an early assignment would create a short stock position in your account. This may incur borrowing fees and make you responsible for any dividend payments.

Also note that if you hold a short call on a stock that has a dividend payment coming in the near future, you may be responsible for paying the dividend even if you close the position before it expires.

An early assignment generally happens when the put option is deep in the money and the underlying stock does not have an ex-dividend date between the current time and the expiration of the option.

Short call + long call

(The same principles apply to both two-leg and four-leg strategies)

This would leave your account short the shares you’ve been assigned, but the risk of the position would not change . The long call still functions to cover the short share position. Typically, you would buy shares to cover the short and simultaneously sell the long leg of the spread.

Pay attention to short in-the-money call legs on the day prior to the stock’s ex-dividend date, because an assignment that evening would put you in a short stock position where you are responsible for paying the dividend. If there’s a risk of early assignment, consider closing the spread.

Short put + long put

Early assignment would leave your account long the shares you’ve been assigned. If your account does not have enough buying power to purchase the shares when they are assigned, this may create a Fed call in your account.

However, the long put still functions to cover the position because it gives you the right to sell shares at the long put strike price. Typically, you would sell the shares in the market and close out the long put simultaneously.

Here's a call example

• Let’s say that you’re short a 100 call and long a 110 call on XYZ stock; both legs are in-the-money.
• You receive an assignment notification on your short 100 call, meaning you sell 100 shares of XYZ stock at 100. Now, you have $10,000 in short stock proceeds, your account is short 100 shares of stock, and you still hold the long 110 call.
• Exercise your long 110 call, which would cover the short stock position in your account.
• Or, buy 100 shares of XYZ stock (to cover your short stock position) and sell to close the long 110 call.

Here's a put example:

• Let’s say that you’re short a 105 put and long a 95 put on XYZ stock; the short leg is in-the-money.
• You receive an assignment notification on your short 105 put, meaning you buy 100 shares of XYZ stock at 105. Now, your account has been debited $10,500 for the stock purchase, you hold 100 shares of stock, and you still hold the long 95 put.
• The debit in your account may be subject to margin charges or even a Fed call, but your risk profile has not changed.
• You can sell to close 100 shares of stock and sell to close the long 95 put.

Long call + short call

Debit spreads have the same early assignment risk as credit spreads only if the short leg is in-the-money.

An early assignment would leave your account short the shares you’ve been assigned, but the risk of the position would not change . The long call still functions to cover the short share position. Typically, you would buy shares to cover the short share position and simultaneously sell the remaining long leg of the spread.

Long put + short put

An early assignment would leave your account long the shares you’ve been assigned. If your account does not have enough buying power to purchase the shares when they are assigned, this may create a Fed call in your account.

All spreads that have a short leg

(when all legs are in-the-money or all are out-of-the-money)

Pay attention to short in-the-money call legs on the day prior to the stock’s ex-dividend date because an assignment that evening would put you in a short stock position where you are responsible for paying the dividend. If there’s a risk of early assignment, consider closing the spread.

However, the long put still functions to cover the long stock position because it gives you the right to sell shares at the long put strike price. Typically, you would sell the shares in the market and close out the long put simultaneously. 

What to read next...

How to buy call options, how to buy put options, potentially protect a stock position against a market drop, looking to expand your financial knowledge.

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Short Call Options Strategy (Awesome Guide w/ Examples)

Options trading 101 - the ultimate beginners guide to options.

Download The 12,000 Word Guide

Today we’re going to take a detailed look at the short call options strategy.

This is not a strategy that is recommended for beginners due to the unlimited loss potential, so don’t try this strategy until you have at least 12 months experience.

Let’s get started.

What Are Short Call Options?

Maximum loss, maximum gain, breakeven price, payoff diagram, risk of early assignment.

Short call options are also called naked calls due to the fact they are not covered by a position in the underlying stock.

Traders looking at this strategy would be mildly bearish, although it can be trading as an aggressive bearish position by bring the short strike closer to the stock price.

With a short call option, the trader is looking for the stock to stay flat or decline.

The trade can still profit in the case of the stock rising slightly, but that is not the preferred scenario as it could put the trade under pressure and see the trader sitting on unrealized losses and therefore faced with the difficult decision to cut losses or stay in a losing trade.

After placing a short call option trade, the trader has an obligation to sell the stock to the buyer of the option at the agreed price on or before the expiration date.

This would only occur if the call option was assigned by the buyer.

Assignment can occur at any time but is more likely when the stock price is above the strike price and there is little time value left in the call options.

If the stock price stays below the short strike for the duration of the trade, the call option will expire worthless and the option position will be removed from the seller’s account.

While this article is only focused on naked calls, selling a short call is common for investors who already own the stock and are looking to generate additional income. This strategy is known as a covered call .

The maximum loss on the trade is theoretically unlimited as the stock can continue moving higher with no limit.

For this reason, it is not a recommended strategy for beginners.

Some traders will set a stop loss at 1.5 to 2 times the premium received.

However, I’ve seen many cases where overbought stocks have rocketed higher following a positive news announcement.

Stop losses do little help in that situation as the stock blows right through the stop loss level.

The maximum gain for the strategy is limited to the premium received for selling the call option.

When calculating the percentage return, traders can take the premium received divided by the margin requirement.

This can be a little deceptive because the potential loss can be much higher than the margin requirement.

Also, if the stock moves higher, the margin requirements will increase as the position comes under pressure.

The breakeven price for a short call option strategy is the short call strike plus the premium received.

For example, if a stock is trading at $120 and the trader sells a $125 call option for a premium of $2.50, the breakeven price would be $127.50.

Keep in mind that is the breakeven price at expiry.

The trade could be in a loss position at much lower levels if the stock moves higher early in the trade.

Short calls have a similar shaped payoff diagram to a long put.

Profits are flat below the strike price with a breakeven price equal to the strike price plus the premium.

Above the breakeven price, losses accrue on a one to one basis with a move higher in the stock price.

The T+0 line in the payoff diagram below show that losses can occur at prices lower than the breakeven price on interim dates.

There is always a risk of early assignment when having a short option position in an individual stock or ETF.

You can mitigate this risk by trading Index options , but they are more expensive.

Usually early assignment only occurs on call options when there is an upcoming dividend payment and / or if there is very little time premium left.

Traders will exercise the call in order to take ownership of the stock before the ex-date and receive the dividend.

Short calls have negative delta, negative gamma, negative vega and positive theta.

As a negative delta trade, the ideal scenario for the trader is a drop in the stock price. Delta is going to be the main driver of the trade as far as the greeks are concerned.

The closer the trade is placed to the stock price, the higher the negative delta will be.

Aggressively bearish traders would place the short strike closer to the money which would provide a larger negative delta exposure and generate a higher option premium.

Less bearish traders might place the trade further away from the stock price giving them less delta exposure but also reducing the amount of premium received.

In the PG example above, the trade has a delta of -25 which is an equivalent exposure to being short 25 shares.

The delta will change as the trade progress due changes in the stock price and the other greeks.

Short calls are negative gamma which means the delta exposure will become more negative as the stock rises.

This has the effect of losses starting to “snowball” as the stock rises.

For this reason, it’s important to cut losses or hedge earlier rather than later.

The PG short call example has gamma of -3 meaning that for every $1 change in the underlying stock price, the delta will change by 3.

Vega is the greek that measures a position’s exposure to changes in implied volatility . If a position has negative vega overall, it will benefit from falling volatility.

Negative vega on a short call strategy means the position will benefit from a decrease in implied volatility after placing the trade.

If the stock stays flat and implied volatility drops, the trade will start to be in a profitable position.

The PG short call strategy has vega of -14 meaning that for every 1% change in implied volatility, the P&L on the position will change by +/- $14.

Short call options are a positive theta trade meaning that they will benefit from time passing.

This is also known as time decay .

The PG trade has theta of 4 meaning that the trade will make $4 per day from time decay with all else being equal.

It goes without saying that as a bearish trade, there is a risk that the price of the underlying will rise causing an unrealized loss, or a realized loss if we close the trade.

Some other risks associated with short call options:

ASSIGNMENT RISK

We talked about this already so won’t go into to much detail here and while this doesn’t happen often it can theoretically happen at any point during the trade. The risk is most acute when a stock trades ex-dividend.

If the stock is trading well below the sold call, the risk of assignment is very low. E.g. a trader would generally not exercise his right to buy PG at $145 when PG is trading at $138 purely to receive a $0.50 dividend.

The risk is highest if the stock is trading ex-dividend and the short call is in the money.

One way to avoid assignment risk is to trade stocks that don’t pay dividends, or trade indexes that are European style and cannot be exercised early.

However, this should not be the primary factor when determining which underlying instrument to trade.

Otherwise, think about closing your short call option before the ex-dividend date if it is in-the-money.

EXPIRATION RISK

Leading into expiration, if the stock is trading just above or just below the short call, the trader has expiration risk.

The risk here is that the trader might get assigned and then the stock makes an adverse movement before he has had a chance to cover the assignment.

In this case, the best way to avoid this risk is to simply close out the spread before expiry.

While it might be tempting to hold the spread and hope that the stock drops and stays below the short call, the risks are high that things end badly.

Sure, the trader might get lucky, but do you really want to expose your account to those risks?

VOLATILITY RISK

As mentioned on the section on the greeks, this is a negative vega strategy meaning the position benefits from a fall in implied volatility .

If volatility rises after trade initiation, the position will likely suffer losses.

Let’s look at an example trade:

CVX SHORT CALL

Date: July 7, 2020

Current Price: $86.31

Trade Set Up:

Sell 1 CVX Aug 21st, 95 call @ $1.51

Premium: $151 Net credit

Capital (Margin) Requirement: $864

Return Potential: 17.48%

Annualized Return Potential: 141.78%

The trade was never under pressure and expired for a full profit.

Let’s also look at an example of a losing trade to illustrate what can go wrong.

UNH SHORT CALL

Date: February 27, 2020

Current Price: $256.76

Sell 1 UNH Apr 17 th , 290 call @ $3.06

Premium: $306 Net credit

Capital Requirement: $2,568  

Return Potential: 11.92%

Annualized Return Potential: 86.99%

This trade did not work at all and within a few days the trade was down $950. A good example of what can go wrong.

The margin requirement had also blown out to $5,495 which is an important consideration to keep in mind when trading short calls.

Short call options are a risky strategy due to the unlimited loss potential, so they are not recommended for beginners.

Traders employing this strategy are looking for the stock to decline, stay flat, or not rise by too much.

The profit is limited to the premium received.

Aggressively bearish traders might place the short call closer to the money in order to obtain a larger negative delta exposure and higher premium received.

Trade safe!

Disclaimer: The information above is for  educational purposes only and should not be treated as investment advice . The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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Closed my Oct BB (a few moments ago) for 34% profit…that is the best of the 3 BBs I traded since Gav taught us the strategy…so, the next coffee or beer on me, Gav 🙂

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Options Assignment

How can i tell when i will be assigned.

You can never tell when you will be assigned. Once you sell an American-style option (put or call), you have the potential for assignment to fulfill your obligation to receive (and pay for) or deliver (and are paid for) shares of stock on any business day. In some circumstances, you may be assigned on a short option position while the underlying shares are halted for trading, or perhaps while they are the subjects of a buyout or takeover.

To ensure fairness in the distribution of equity and index option assignments, OCC utilizes a random procedure to assign exercise notices to clearing member accounts maintained with OCC. The assigned firm must then use an exchange-approved method (usually a random process or the first-in, first-out method) to allocate notices to its accounts that are short the options.

Some generalizations might help you understand likelihood of assignment on a short-option position:

• Option holders only exercise about 7% of options. The percentage hasn't varied much over the years. That does not mean that you can only be assigned on 7% of your short option. It means that, in general, option exercises are not that common.
• The majority of option exercises (and the corresponding assignments) occurs as the option gets closer to expiration. It usually doesn't make sense to exercise an option, which has any time premium over intrinsic value. For most options, that doesn't occur until close to expiration.
• In general terms, an investor is more likely to exercise a put that goes in-the-money than a call that goes in-the-money. Why? Think about the result of an exercise. An investor who exercises a put uses it to sell shares and receive cash. A person exercising a call option uses it to buy shares and must pay cash. Option holders are more likely to exercise options if it means they can receive cash sooner. The opposite is true for calls, where exercise means you have to pay cash sooner.

The bottom line is that you really don't have any sure-fire way to predict when you will be assigned on a short option position. It can happen any day the stock market is open for trading.

Could I be assigned if my covered calls are in-the-money?

If i am short a call option (on a covered write) and i buy back my short call, is it possible for..., if i am short a call option (on a covered write) and i buy back my short call, is it possible for me to be assigned (and the stock position to be called away) that night, i sold short 10 options contracts recently. unfortunately, i was assigned early on each contract..., i sold short 10 options contracts recently. unfortunately, i was assigned early on each contract, one at a time. couldn't all the contracts have been assigned at once, are options automatically assigned when they are in-the-money at expiration is there a way that..., are options automatically assigned when they are in-the-money at expiration is there a way that i can avoid assignment.

OCC encourages all investors to inform their brokerage firm of their exercise intentions for their long options at expiration. While each firm may have their own thresholds, OCC employs an administrative procedure where options that are $.01 in-the-money are exercised unless contrary instructions are provided. Customers and brokers should check with their firm's operations department to determine their company's policies regarding exercise thresholds.

An option holder has the right to exercise their option regardless of the price of the underlying security. It is a good practice for all option holders to express their exercise (or non-exercise) instructions to their broker. Is there a magic number that ensures that option writers will not be assigned? No. Although unlikely, an investor may choose to exercise a slightly out-of-the-money option or choose not to exercise an option that is in-the-money by greater than $.01.

Some investors use the saying, "when in doubt, close them out.” This means that if they buy back any short contracts, they are no longer at risk of assignment.

I wrote a slightly out-of-the-money covered call. The call has since moved in-the-money. Is there...

I wrote a slightly out-of-the-money covered call. the call has since moved in-the-money. is there any way to avoid assignment on that short call, if i buy-to-close a short option position, how can i be sure i will not be assigned.

You will want to first check with your broker to ensure that an assignment has not already occurred.

Because OCC processes closing buy transactions before exercises, there is no possibility of being assigned on positions that were closed during that day's trading hours.

When I sell an option to open, is my only chance of assignment (and being required to fulfill my...

When i sell an option to open, is my only chance of assignment (and being required to fulfill my obligations as the option writer) when the person or entity that bought from me decides to exercise.

No. There are several reasons why this is untrue. First, the buy side of your opening sale could have been a closing purchase by someone who was already short the option. Second, OCC allocates assignments randomly. Anyone short that particular option is at risk of assignment when an option holder decides to exercise. Third, assuming the other side of your trade was an opening purchase, they may sell to close at any time but since you are still short, you are at risk of assignment.

As long as you keep a short option position open, you are at risk of assignment. Assignment risk increases as the option becomes deeper in-the-money and as expiration approaches (the option trades with less time premium). Assignment risk also increases just before the ex-dividend date for short calls and just after the ex-dividend date for short puts.

At expiration, OCC exercises all equity options that are in-the-money by $.01 or more unless the option holder instructs their broker not to exercise or the stock has been removed from OCC’s exercise-by-exception processing.

The exchanges recently halted trading on a stock where I’m short puts. Am I still obligated to...

The exchanges recently halted trading on a stock where i’m short puts. am i still obligated to purchase the security if assigned.

Short Call - At a Glance

Alternative name.

• Uncovered Call

Pre-Requisite Strategy Knowledge

• Short Stock

Legs of Trade

• Sell 1 XYZ call
• Short 10 XYZ January 50 calls for $1.45, less fees and commissions

Rule to Remember

Max potential profit (gain).

• Net Premium Collected

Break-Even Point

• The breakeven point occurs when XYZ stock price is trading equal to the strike price plus the net premium collected.

Max Potential Risk (LOSS)

Ideal outcome.

• XYZ price rises significantly above the strike price plus net premium paid

Margin Requirement

Early assignment risk.

• Equity options in the United States can be exercised on any business day, and the holder of a short options position has no control over when they will be required to fulfill the obligation. Therefore, the risk of early assignment must be considered when entering positions involving short options. Early assignment of options is generally related to dividends, and short calls that are assigned early are generally assigned on the day before the ex-dividend date. In-the-money calls whose time value is less than the dividend have a high likelihood of being assigned.
• The short call strategy has early assignment risk.
• If the stock price is above the strike price of the short call, a decision must be made if early assignment is likely. If you believe assignment is likely and you do not want a short stock position, then appropriate action must be taken. Before assignment occurs, the risk of assignment can be eliminated by: (1) Purchasing the call option to close out your short call position.
• If early assignment of a short call does occur, stock is sold. If you do not own the stock that is to be delivered, then a short stock position is created. If you do not want a short stock position, you can close it out by buying stock in the marketplace. Important consideration : Assignment of a short call might also trigger a margin call if there is not sufficient account equity to support the short stock position.
• Also, if a short option is assigned it creates a short position which may result in hard to borrow securities lending fees.

- ‌Powered by The Options Institute

Disclaimer: Cboe and Webull are separate and unaffiliated companies. This content is provided by Cboe and does not reflect the official policy or position of Webull. This content is for educational purposes only and is not investment advice or a recommendation or solicitation to buy or sell securities.

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The Short Option: A Primer on Selling Options

With every transaction, there's a buyer and a seller, which is true for options trading too. Instead of buying a call or put option, traders can sell them, which means that instead of paying the premium, they can collect the premium, and instead of time value working against them, it can work for them. Of course, selling options comes with significant risks too. Here's a little background on what the options trader needs to know before selling options.  

Please note that options trading involves significant risks and is not suitable for everyone. Certain requirements must be met to trade options through Schwab. Not all clients will qualify. Naked options strategies involve the highest amount of risk and are only appropriate for traders with the highest risk tolerance.  

Short selling options

Generally, a trader buys a call if they're bullish and buys a put if they're bearish. However, selling a call is usually a bearish strategy, and selling a put is usually a bullish strategy.

Selling or "shorting" options obligates the trader to either buy or sell the underlying security at any time up until the option expires or until the option is bought back to close or assigned 1 . In the case of a short call options position (see figure below), the trader has the obligation to sell the stock at a set price, known as the strike price, and is taking on unlimited risk because there's no limit to how far a stock can climb.

Risk profile of short call

With a short put options position, the trader accepts the obligation to buy the stock at the strike price when the market price of the stock will likely be lower and could continue to fall. And although the stock could drop considerably before the trader decides to sell, the risk is technically limited because a stock's price cannot drop below $0.

The short put

Traders might employ a short put strategy 2 for two main reasons: to potentially buy the stock at a lower price and/or to collect options premiums. With a short put position (see figure below), the trader takes in some premium in exchange for taking on the responsibility of potentially buying the underlying stock at the strike price. This money is credited to the account, and the trader keeps it even if the stock trades below the strike of the short put option.

Risk profile of short put

At any time prior to expiration, the trader who owns the put has the right to exercise the option. The likelihood of the put option being exercised increases if the stock trades at a price that's lower than the strike price. In that case, the short put seller would have a higher probability of assignment, meaning they'd have to buy the underlying stock at the strike price.

Let's say XYZ stock is currently trading at $64.50. However, the trader doesn't want to pay more than $60 per share to own it. They could sell the XYZ January 60 strike put for $2 per contract, obligating them to pay $60 per share for XYZ stock if assigned—exactly what they wanted. But because they're collecting $2 for the put, the net cost for the stock would be $58 per share (plus transaction fees) if they're assigned on the 60-strike put.

What about assignment?

If assigned on a short put, the trader takes delivery of the stock at the strike price, and it becomes part of their portfolio. For a standard options contract, the result is the purchase of 100 shares per put that has been assigned, but the quantity might be different if the contract has been adjusted after a stock split or is "nonstandard" for some other reason. Once an assignment notice is received, it's too late to close the options position, and the put seller is required to take delivery of the shares. Like any other stock position, they can then choose to hang on to the stock or sell it.

The impact of dividends

It's true that if XYZ stock happened to pay a dividend, then by owning XYZ entitles the shareholder to that dividend. By being short a put in XYZ stock, on the other hand, the trader is not entitled to a dividend. That said, keep two things in mind.

First, if a trader is assigned on short puts, then they take delivery of the stock, thereby granting them the right to all future dividend payments as long as they remain the stock owner.

Second, put options are adjusted to some degree for upcoming dividends. Puts sold on dividend-paying stocks are built to trade at a slightly higher premium than where they otherwise would trade if the underlying stock didn't offer a dividend, all else being equal. Among other factors, the deeper in the money 3  the put option is, the greater the likelihood that the short option will be assigned and converted to stock, the greater the adjustment for the dividend.

Selling a call

Like selling a put, selling a call provides a premium in exchange for an obligation (to sell 100 shares of stock at the strike price per call option). Now, suppose a trader wants to sell a call option on a stock that is trading at $59.75. Imagine they sold a 60-strike call at $3. This premium is credited to the trader's account, and they get to keep it regardless of where XYZ is at expiration.

If XYZ stays below $60 per share until expiration and the short call isn't assigned, the 60-strike call will likely expire worthless, and the trader will keep the $3 premium. On the other hand, if XYZ trades above $60 per share prior to, or at, expiration, there is a high likelihood of assignment on the short call option. However, keep in mind that a short option can be assigned at any time up to expiration of the option regardless of where the price of the underlying is trading.

Assignment due

If a short call is assigned, the trader will receive a notice and be asked to sell the stock at $60. If they don't own or buy the necessary number of shares, the account will end up short 4 those shares, which will require the use of margin (as well as any subsequent margin interest on the short position) and the price of the shares could rise, leading to losses, or fall, leading to gains. If the trader doesn't own the underlying stock, then the risk of loss of the subsequent short stock is unlimited because there's no limit to how much higher the stock can rise.

Deflating dividends

Options on dividend-paying stocks usually have lower call premiums because the stock price drops to reflect the dividend. Despite this effect, a call seller does carry the risk of the buyer exercising the call to grab the dividend before its paid. And the closer the ex-dividend date approaches, the higher the risk.

Because the risks of selling options can be substantial, many traders allocate only a small percentage of their portfolios to selling them. Also, whether selling puts or calls, the selling must be done in a margin account that's been approved for advanced options strategies. Just as with any new trading approach, traders will want to carefully balance the risks with the potential opportunities before diving in.

Option Hacker

The Option Hacker tool on the thinkorswim ® trading platform can help traders find options that meet their trading criteria. Under the Scan tab, select Option Hacker , then All Optionable in the drop-down menu. From here, traders can choose their options criteria. If it helps, traders can also add stock filters, such as volume or the Sizzle Index, to find movers and shakers. Finally, select the Scan button to see the scan's results populate at the bottom of the screen as shown below.

Source: thinkorswim platform

1  Assignment occurs when an option holder exercises their put or call and a delivery notice is delivered to the trader with the short option. With calls, assignment involves the short option party selling shares, and with puts, assignment means the short option party buying the shares.

2 A bullish strategy in which a put option is sold for a credit, usually at a strike price below the current price. This may be done with a goal of the stock staying above the strike price and the option expiring worthless and the premium collected. Or it may be done with a goal of being assigned the stock at the lower strike price. The risk is that the stock is assigned and then falls in value, taking the total risk of the strike price down to $0 minus the premium from selling the put.

3 In the money (ITM) describes an option with intrinsic value. A put option is ITM if the strike price is above the underlying stock price. A call option is ITM when the strike price is below the underlying stock price.

4 Short selling typically involves borrowing a security from the brokerage, selling it on the open market in anticipation of a move lower, and buying back and returning the borrowed shares later.

Just getting started with options?

More from charles schwab.

Today's Options Market Update

Weekly Trader's Outlook

How Interest Rate Movements Affect Options Prices

Related topics.

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Please read the options disclosure document titled " Characteristics and Risks of Standardized Options ". Supporting documentation for any claims or statistical information is available upon request.

Margin trading increases your level of market risk. For more information, please refer to your account agreement and the Margin Risk Disclosure Statement.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Assignment Risk, Short Calls, And Ex-Dividend Dates

If you are short call options in a stock or an Exchange Traded Product (ETP) like SPY or IWM you need to be aware of ex-dividend dates.  If your calls are in the money, even barely, your options may be assigned right before the security goes ex-dividend—and then you may have a problem.

First the good news:

In addition to assignment risk, the other thing to watch with ex-dividend dates is distortion in the implied volatility (IV) of options.  For example, the IV of deep ITM calls will be distorted because the market will not give you a profitable low-risk trade (e.g., a covered call with deep ITM calls virtually certain to be assigned). You can create this position, but the premium from selling the calls will be non-existent, and therefore only risk and no profit.

At the money (ATM) calls will also have reduced IVs.  Normally these won’t be assigned because they will have premiums higher than the dividend payout.  On the ex-dividend date you’ll see their IV’s jump up—just enough such that the call prices don’t move despite any drop in the underlying.  No easy money here.

For special dividends, option strike prices are often adjusted to protect option holders from unforeseen corporate actions.  For more see Profiting from Special Dividends .

Click here to leave a comment

5 thoughts on “assignment risk, short calls, and ex-dividend dates”.

Would it be accurate to say the SPX call options still price in dividends the SPY would receive but cannot be called away due to being European-style?

I trade in Brazil. In the brazilian exchange(BMFBOVESPA), when a stock goes ex, all the options on it also have their strike lowered to match the dividend, so this does not happen here (the exercise of ITM stock calls). However, sometimess our index futures are below the spot index (due to the loan rate on the index components being higher than the risk free rate), and some american ITM calls on the spot index get exercised early, so in these ocasions american and european(both available) have different prices.

Hi, Kurast. Turquoise does the same for Russia originated depository receipts. I thought it was a unique practice on this exchange, but you confirmed BM&F did the same.

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Options Assignment

What is early options assignment what happens when options get assigned, options assignment - introduction, options assignment prior to expiration, options automatic exercise and assignment during expiration, can i avoid getting automatically exercised or assigned during expiration, what happens when long call options get automatically exercised.

What Happens When Short Call Options Get Automatically Exercised?

What Happens When Long Put Options Get Automatically Exercised?

What Happens When Short Put Options Get Automatically Exercised?

Generalisations about Short Options Assignments Before Expiration

Options assignment threshold during expiration, options assignment questions:.

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Tim Walz, Who Spent Decades as an Enlisted Soldier, Brings Years of Work on Vets Issues to Dem Ticket

A retired Army National Guard noncommissioned officer who was once the top Democrat on the House Veterans Affairs Committee could become the next vice president.

Presumptive Democratic presidential nominee Vice President Kamala Harris announced Tuesday that Minnesota Gov. Tim Walz will be her running mate. That puts someone with an enlisted background on both presidential tickets after Republican nominee former President Donald Trump chose Marine veteran Sen. JD Vance of Ohio as his running mate.

Patrick Murphy, an Army veteran who was Walz' roommate when they were both freshmen in Congress, called Walz a "soldier's soldier."

Read Next: A Rocket Attack at an Iraqi Military Base Injures US Personnel, Officials Say

"The two largest federal agencies are DoD and the VA, so someone who has intimate knowledge of both is incredibly important," Murphy, who served as Army under secretary during the Obama administration, said in a phone interview with Military.com. "He was a field artilleryman who has tinnitus as diagnosed by the VA, so he understands the plight of our brother and sister veterans."

Walz enlisted in the Army National Guard in Nebraska in 1981 and retired honorably in 2005 as the top enlisted soldier for 1st Battalion, 125th Field Artillery Regiment, in the Minnesota National Guard, according to a copy of his records provided by the Minnesota Guard. He reached the rank of command sergeant major and served in that role, but he officially retired as a master sergeant for benefits purposes because he didn't finish a required training course, according to the records and a statement from the Minnesota Guard.

His Guard career included responding to natural disasters in the United States, as well as a deployment to Italy to support U.S. operations in Afghanistan, according to a 2018 article by Minnesota Public Radio . Walz earned several awards, including the Army Commendation Medal and two Army Achievement Medals, according to his military records. Working a civilian job as a high school teacher and football coach, the Nebraska native was also named that state's Citizen Soldier of the Year in 1989, according to official biographies.

During the 2022 Minnesota governor's race, Walz' opponent accused him of leaving the Guard when he did in order to avoid a deployment to Iraq, though Walz maintained he retired in order to focus on running for Congress, according to the Star Tribune newspaper .

Far-right commentators and media resurfaced those allegations and knocked him for never serving in combat -- something he has never claimed to do -- in contrast with Vance's deployment to Iraq as a combat correspondent.

"Looks like it is time to bring back Swift Boat Veterans for Truth. Oof. Walz is a really unforced error. He bailed on the military when they decided to send him to Iraq. JD Vance actually served," conservative talk radio host Erick Erickson posted on social media Tuesday.

Walz was first elected to the House of Representatives in 2006, becoming the highest-ranking retired enlisted soldier to serve in Congress.

His tenure in Congress included sitting on the House Veterans Affairs Committee, rising to be its ranking member in 2017.

"Walz' leadership on behalf of his fellow veterans when he was in the U.S. House of Representatives is notable at a time when our all-volunteer force continues to struggle to recruit," Allison Jaslow, CEO of Iraq and Afghanistan Veterans of America, said in a statement praising the choice of a veteran to be vice presidential nominee. "How we care for our veterans is as important to our national security as how we care for our troops, and Walz has a record to prove that he understands that imperative."

As the top Democrat on the committee, Walz was a chief adversary for the Trump administration's Department of Veterans Affairs . He battled with then-acting VA Secretary Peter O'Rourke in 2018 during a standoff over O'Rourke's handling of the inspector general's office, and pushed for an investigation into the influence of a trio of informal VA advisers who were members of Trump's Mar-a-Lago club. An investigation by House Democrats completed after Walz left Congress concluded that the so-called Mar-a-Lago trio "violated the law and sought to exert improper influence over government officials to further their own personal interests."

Walz also opposed the Mission Act, the bill that expanded veterans' access to VA-funded care by non-VA doctors that Trump considers one of his signature achievements. Walz said in statements at the time that, while he agreed the program for veterans to seek outside care needed to be fixed, he believed the Mission Act did not have sustainable funding. VA officials in recent years have said community care costs have ballooned following the Mission Act.

Walz supported another bill that Trump touts as a top achievement, the Department of Veterans Affairs Accountability and Whistleblower Protection Act, which sought to make it easier for the VA to fire employees accused of misconduct or poor performance. But the implementation of that law was later part of Walz' fight with O'Rourke . The law also faced legal challenges that prompted the Biden administration to stop using the expedited firing authorities granted by the bill.

Walz was also an early proponent of doing more for veterans exposed to toxins during their military service, sponsored a major veterans suicide prevention bill and advocated for the expansion of GI Bill benefits. And he repeatedly pushed the VA to study marijuana usage to treat PTSD and chronic pain, something that could come up in a future administration if the Department of Justice finalizes reclassifying marijuana into a category of drugs considered less dangerous.

Walz' time in Congress also included a stint on the House Armed Services Committee, a perch he used to advocate for benefits for members of the National Guard .

Walz consistently voted in support of the annual defense policy bill, as well as advocated for repealing the "Don't Ask, Don't Tell" policy that effectively banned gay and lesbian service members.

"He was my battle buddy in the fight to repeal 'Don't Ask, Don't Tell,' and it wouldn't have happened if we didn't have Command Sgt. Maj. Tim Walz helping lead the fight," Murphy said.

Since becoming governor of Minnesota in 2019, Walz' role as commander in chief of the Minnesota National Guard has come under a spotlight several times. In response to a request from the Minneapolis mayor, he activated the Guard in May 2020 to assist law enforcement when some protests over the Minneapolis police killing of George Floyd turned destructive. At the time, Minneapolis' mayor accused Walz of being too slow to order the deployment, a charge he denied.

"It is time to rebuild. Rebuild the city, rebuild our justice system, and rebuild the relationship between law enforcement and those they're charged to protect," Walz said in a statement when he announced the activation.

He also activated the Guard to protect the Minnesota state Capitol in January 2021 amid fears that Trump supporters could riot at state houses like they did at the U.S. Capitol that month. And he's used the Guard for missions that are more routine for the service, such as to help after heavy flooding earlier this summer .

As news broke Tuesday of Walz' selection, he quickly won praise from other Democratic veterans.

"Having a person who wore the uniform and who deployed around the world adds to the ticket someone who can connect with veterans and military families in a way that no one but a veteran can," Jon Soltz, chairman of liberal political action committee VoteVets, said in a statement.

-- Steve Beynon contributed to this story.

Related: Here's Kamala Harris' Record on Veterans and Military Issues

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What Walz — and the records — say about his military service as others criticized it

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In 1981, Tim Walz and his father traveled to the nearest Army National Guard enlistment officer to his hometown in Nebraska.

“We met up with a lieutenant who had to get off his tractor from early spring plowing,” Walz said in a 2018 interview with MPR News. “And we did the oath of enlistment right there on the edge of a field with the recruiter. And that led me on a 24-year journey.”

The Minnesota governor, and now running mate with Vice President Kamala Harris, has often talked about his service in the National Guard. Now others are talking about it too, and not always in glowing terms, especially when it comes to Walz’s stepping away from the Guard.

Harris called him a “patriot” in Philadelphia on Tuesday, the first rally the two held together.

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“To his fellow veterans. He is Sergeant Major Walz,” Harris said, as the crowd cheered.

Republican vice presidential candidate Sen. JD Vance took aim at the governor’s accounts of his service on the campaign trail, calling Walz’s decision to leave the National Guard when he did “shameful.”

• Discover more The MPR News' Tim Walz archive
• Be informed Minnesota Voter Guide from MPR News

Members of the National Guard train to fight in wars, and to respond to national security threats. They also are called up for state emergencies. The majority of guard members have full-time civilian jobs and serve part-time in the guard.

Walz served in Nebraska, Texas and Arkansas before moving to Minnesota in 1996. He was in the 1st Battalion, 125th Field Artillery based in New Ulm.

He specialized in heavy artillery and had ribbons for proficiency in sharpshooting and hand grenades, according to military records MPR News obtained through an open records request.

During his service, he suffered hearing damage due to heavy artillery use . He later had surgery to address that.

His training missions included one near the Arctic Circle in northern Norway.

In 2003 he was deployed to Italy for nine months, providing support for the war in Afghanistan .

“[Our] responsibility was to provide support at these bases in the early parts of the war in 2003, where these troops in the active force went forward into the war zone,” Walz said. “And we went in and provided base security, provided training on the backside, because the regular force was deployed downrange.”

On May 15, 2005, Walz retired from the Guard. His separation record says he did so honorably.

Later that year, his battalion was deployed for the Iraq war.

The 1-125th Field Artillery “received an alert order for mobilization to Iraq on July 14, 2005. The official Department of the Army mobilization order was received on Aug. 14, 2005, and the unit mobilized on Oct. 12, 2005,” said Lt. Col. Ryan Rossman, Minnesota National Guard’s director of operations.

At the time of his retirement, Walz was 41 and wanted to run for Congress. He was elected to the 1st Congressional District seat the following year.

In the 2022 race for governor, Republican candidate Scott Jensen — flanked by veterans — pointedly questioned Walz’s decision to leave the Guard before the battalion’s Iraq deployment.

“In my eyes, today is the day that Tim Walz is indicted for lack of leadership and an unwillingness to do his duty, and Minnesota needs to know about it,” Jensen said.

Walz said in 2018 he believed he could make a difference as a voice for soldiers in Congress.

“I wouldn’t put myself as a hero, but 24 years of service commendations, rising to a rank that your listeners who are in the military know, you don’t get to bluff your way to that, you earn that and, and I’m certainly proud of that,” he said.

Allan Bonnifield served with Walz, whom he first met in 1999. In a 2018 interview with MPR News, Bonnifield said Walz debated whether he should focus on a run for Congress or stay in the National Guard.

“He weighed that decision to run for Congress very, very heavy,” Bonnifield said. “He loved the military, he loved the Guard, he loved the soldiers that he worked with, and making that decision was very tough for him. Especially knowing that we were going on another deployment to Iraq. He didn’t take that decision lightly at all.”

Vance, who criticized Walz’s record, served four years in the Marines. He was deployed to Iraq for six months in 2005 as a combat correspondent, or military journalist according to Task and Purpose, a publication that covers the military.

Bonnifield said Walz focused on veterans in Congress . Of the 85 bills Walz sponsored over his six terms, nearly half had to do with veterans’ issues.

“He worked on making it easier for Guard members struggling to get help and contact the right people for post traumatic stress help, for the suicidal thoughts, for just making things quicker and making it so people realized it is an actual problem, it’s not something that will just go away,” Bonnifield said.

There have also been questions raised by critics about two aspects of Walz’s retirement documents. First, his title at retirement, and second, a lack of a signature on his separation record.

Walz left the military at the rank of command sergeant major, one of the top for an enlisted soldier.

Personnel file records show that he was reduced in rank months after retiring, leaving him as a master sergeant for benefits purposes.

“[Walz] held multiple positions within field artillery such as firing battery chief, operations sergeant, first sergeant and culminated his career serving as the command sergeant major for the battalion,” said Lt. Col. Kristen Augé, a public affairs officer with the Minnesota National Guard. “He retired as a master sergeant in 2005 for benefit purposes because he did not complete additional coursework at the U.S. Army Sergeants Major Academy.”

In the separation record for Walz, a signature box says “Soldier not available for signature.” The guard said that’s relatively routine for these documents.

“For members of the reserve components, who are not available for signature, using the regulatory statement of ‘not available to sign’ is common,” said Army Col. Ryan Cochran, the Minnesota National Guard’s director of manpower and personnel. “This statement is authorized and directed by both Army Regulations and National Guard Regulations to ensure the timely processing of administrative actions.”

MPR News politics editor Brian Bakst and former APM Reports correspondent Chris Haxel contributed reporting to this story.

• A win for the Harris-Walz ticket would also mean the country’s first Native American female governor
• State GOP leader calls Harris-Walz agenda ‘extreme,’ out of touch with rural voters
• Gov. Tim Walz is Kamala Harris’ running mate. What happens now in Minnesota politics?

JPMorgan says the carry trade that pummeled markets is only half done

• The unwinding of the carry trade that's battered stocks in recent days isn't done, JPMorgan says.
• It says that trade is probably only half over, as Japan looks poised to continue raising rates.
• Markets on Tuesday are recovering from the sell-off, but jitters remain about the state of the US economy.

The "carry trade" unwind that helped spark the bloodbath in US stocks over the past few days likely isn't close to over, a JPMorgan strategist says.

Arindam Sandilya, the bank's cohead of global FX strategy, pointed to the recent sell-off in global equities, with major US stock indexes plunging over the past three trading days.

Market commentators say that's been partly stoked by a surprise 15-basis-point interest-rate hike in Japan, which triggered some investors to unwind a trade that's become popular in recent years. In this trade, investors borrow cheap yen and deploy the cash into higher-yielding assets elsewhere, like US stocks. As the yen strengthened and borrowing costs rose, investors taking advantage of the carry trade received margin calls, sparking a wave of selling around the world.

But Sandilya said that the unwind was probably only half done and that investors hoping for a quick rebound are likely to be disappointed.

"We think that the carry-trade unwind, at least within the speculative-investing community, is maybe somewhere between 50% to 60% complete," Sandilya said in an interview with Bloomberg on Tuesday. "So we are not done, by any stretch."

Sandilya said the Bank of Japan is likely to continue to slowly raise interest rates, given that borrowing costs in the nation are "nowhere near" calibrated to its real economy.

Policymakers in the country are eyeing inflation risks, according to the central bank's latest meeting minutes, which suggest more policy tightening is in store.

Meanwhile, citing technical studies JPMorgan conducted, Sandilya said investor portfolios don't tend to recover quickly after experiencing technical damage from a major move, as markets have displayed over the past several trading days.

"You don't tend to get V-shaped reversals back to where the moves started from. All you tend to get is — at least, a good case outcome is stabilization in markets around current levels, maybe a shallow recovery at best," he said, adding that JPMorgan remained in a "defensive mindset."

US stocks were slightly higher on Tuesday as traders tried to claw back some of their losses from Monday's session, which marked the worst day for stocks in two years.

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Five things to know about Tim Walz

On Tuesday, Vice President Kamala Harris decided on Minnesota Gov. Tim Walz as her running mate in her bid for the White House.

Minnesota voters gathered outside Governor Tim Walz’s residence react as Walz was announced as the running mate of Kamala Harris in the U.S. presidential election. (AP Video by Mark Vancleave)

Vice President Kamala Harris has picked Minnesota Gov. Tim Walz to be her running mate, turning to a Midwestern governor, military veteran and union supporter who helped enact an ambitious Democratic agenda for his state.

FILE - Minnesota Gov. Tim Walz, right, laughs as he stands with Fridley, Minn., Mayor Scott Lund during a visit to the Cummins Power Generation Facility in Fridley, Minn., Monday, April 3, 2023. (AP Photo/Carolyn Kaster, File)

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FILE - Minnesota Gov. Tim Walz applauds as President Joe Biden speaks at Dutch Creek Farms in Northfield, Minn., Nov. 1, 2023. (AP Photo/Andrew Harnik, File)

FILE - Minnesota Gov. Tim Walz listens after meeting with President Joe Biden, July 3, 2024, at the White House in Washington. (AP Photo/Jacquelyn Martin, File)

Minnesota Gov. Tim Walz speaks during a news conference for the Biden-Harris campaign discussing the Project 2025 plan during the third day of the 2024 Republican National Convention near the Fiserv Forum, Wednesday, July 17, 2024, in Milwaukee. (AP Photo/Joe Lamberti)

FILE - Minnesota Governor Tim Walz greets reporters before Vice President Kamala Harris speaks at Planned Parenthood, March 14, 2024, in St. Paul, Minn. (AP Photo/Adam Bettcher, File)

FILE - Rep. Betty McCullum, D-Minn., left, and Minnesota Governor Tim Walz, listen as Vice President Kamala Harris speaks at Planned Parenthood, March 14, 2024, in St. Paul, Minn. (AP Photo/Adam Bettcher, File)

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MINNEAPOLIS (AP) — Vice President Kamala Harris has decided on Minnesota Gov. Tim Walz as her running mate in her bid for the White House. The 60-year-old Democrat and military veteran rose to the forefront with a series of plain-spoken television appearances in the days after President Joe Biden decided not to seek a second term. He has made his state a bastion of liberal policy and, this year, one of the few states to protect fans buying tickets online for Taylor Swift concerts and other live events.

Some things to know about Walz:

Walz comes from rural America

It would be hard to find a more vivid representative of the American heartland than Walz. Born in West Point, Nebraska, a community of about 3,500 people northwest of Omaha, Walz joined the Army National Guard and became a teacher in Nebraska.

He and his wife moved to Mankato in southern Minnesota in the 1990s. That’s where he taught social studies and coached football at Mankato West High School, including for the 1999 team that won the first of the school’s four state championships. He still points to his union membership there.

Walz served 24 years in the Army National Guard, rising to command sergeant major, one of the highest enlisted ranks in the military, although he didn’t complete all the training before he retired so his rank for benefits purposes was set at master sergeant.

He has a proven ability to connect with conservative voters

In his first race for Congress, Walz upset a Republican incumbent. That was in 2006, when he won in a largely rural, southern Minnesota congressional district against six-term Rep. Gil Gutknecht. Walz capitalized on voter anger with then-President George W. Bush and the Iraq war.

During six terms in the U.S. House, Walz championed veterans’ issues.

He’s also shown a down-to-earth side, partly through social media video posts with his daughter, Hope. One last fall showed them trying a Minnesota State Fair ride, “The Slingshot,” after they bantered about fair food and her being a vegetarian.

He could help the ticket in key Midwestern states

While Walz isn’t from one of the crucial “blue wall” states of Wisconsin, Michigan and Pennsylvania, where both sides believe they need to win, he’s right next door. He also could ensure that Minnesota stays in the hands of Democrats.

That’s important because former President Donald Trump has portrayed Minnesota as being in play this year, even though the state hasn’t elected a Republican to statewide office since 2006. A GOP presidential candidate hasn’t carried the state since President Richard Nixon’s landslide in 1972, but Trump has already campaigned there .

When Democratic Gov. Mark Dayton decided not to seek a third term in 2018, Walz campaigned and won the office on a “One Minnesota” theme.

Walz also speaks comfortably about issues that matter to voters in the Rust Belt. He’s been a champion of Democratic causes, including union organizing, workers’ rights and a $15-an-hour minimum wage.

He has experience with divided government

In his first term as governor, Walz faced a Legislature split between a Democratic-led House and a Republican-controlled Senate that resisted his proposals to use higher taxes to boost money for schools, health care and roads. But he and lawmakers brokered compromises that made the state’s divided government still seem productive.

Bipartisan cooperation became tougher during his second year as he used the governor’s emergency power during the COVID-19 pandemic to shutter businesses and close schools. Republicans pushed back and forced out some agency heads. Republicans also remain critical of Walz over what they see as his slow response to sometimes violent unrest that followed the murder of George Floyd by a Minneapolis police officer in 2020.

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Things got easier for Walz in his second term, after he defeated Republican Scott Jensen , a physician known nationally as a vaccine skeptic. Democrats gained control of both legislative chambers, clearing the way for a more liberal course in state government, aided by a huge budget surplus.

Walz and lawmakers eliminated nearly all of the state abortion restrictions enacted in the past by Republicans, protected gender-affirming care for transgender youth and legalized the recreational use of marijuana.

Rejecting Republican pleas that the state budget surplus be used to cut taxes, Democrats funded free school meals for children, free tuition at public colleges for students in families earning under $80,000 a year, a paid family and medical leave program and health insurance coverage regardless of a person’s immigration status.

He has an ear for sound-bite politics

Walz called Republican nominee Donald Trump and running mate JD Vance “just weird” in an MSNBC interview last month and the Democratic Governors Association — which Walz chairs — amplified the point in a post on X . Walz later reiterated the characterization on CNN, citing Trump’s repeated mentions of the fictional serial killer Hannibal Lecter from the film “Silence of the Lambs” in stump speeches.

The word quickly morphed into a theme for Harris and other Democrats and has a chance to be a watchword of the undoubtedly weird 2024 election.

Hanna reported from Topeka, Kansas.

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Colorado Rockies Ace Germán Márquez Out For Rest of 2024 Season With Elbow Injury

Sam connon | aug 8, 2024.

• Colorado Rockies

Germán Márquez's return to the Colorado Rockies' rotation was short lived, and now fans will have to wait until 2025 to see him take the mound again.

Manager Bud Black told reporters on Thursday that Márquez had been diagnosed with a stress reaction in his right elbow. As a result, Márquez has been shut down for the rest of the season.

Márquez previously had Tommy John surgery in May 2023. He started a minor league rehab assignment the following June, then returned to the big leagues to face the New York Mets on July 14.

The Rockies wound up placing Márquez on the 15-day injured list with right elbow soreness on July 22. Márquez tried ramping things back up in a bullpen session this past weekend, but further testing revealed a stress reaction.

There is no damage to Márquez's UCL or any other ligaments, meaning he will avoid surgery. Black said he expects Márquez to start throwing again in six-to-eight weeks and have a full offseason.

Rockies right-hander German Marquez has been shut down for the rest of the season. He has a stress reaction in his right elbow, though there is no damage to the ligaments, etc. He should be ready to throw in 6-8 weeks, according to Bud Black, and will have a full offseason. — Manny Randhawa (@MannyOnMLB) August 8, 2024

Márquez has spent his entire MLB career with the Rockies, making his debut in 2016 and finishing fifth in NL Rookie of the Year voting in 2017. Márquez went on to win a Silver Slugger in 2018, then make the All-Star Game in 2021.

For his career, Márquez is 65-56 with a 4.42 ERA, 1.287 WHIP, 8.7 strikeouts per nine innings, a 3.22 strikeout-to-walk ratio and a 17.5 WAR. He ranks first in strikeout-to-walk ratio, second in WHIP, second in strikeouts per nine innings, third in wins, fourth in WAR and fifth in ERA in Rockies history.

Márquez passed Jorge De La Rosa for  most strikeouts in franchise history  in his lone start last month, although he did allow three earned runs in 4.0 innings of work. He is just 14 strikeouts away from becoming the first Colorado pitcher ever to reach 1,000.

The Rockies have Márquez under contract for $10 million in 2025, thanks to a contract extension they signed him to last fall . By the time next season rolls around, Márquez will have made just five MLB appearances in the previous 19 months.

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Sam Connon is a Staff Writer for Fastball on the Sports Illustrated/FanNation networks. He previously covered UCLA Athletics for Sports Illustrated/FanNation's All Bruins, 247Sports' Bruin Report Online, Rivals' Bruin Blitz, the Bleav Podcast Network and the Daily Bruin, with his work as a sports columnist receiving awards from the College Media Association and Society of Professional Journalists. Connon also wrote for Sports Illustrated/FanNation's New England Patriots site, Patriots Country, and he was on the Patriots and Boston Red Sox beats at Prime Time Sports Talk.

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