Can put options be assigned when the stock is above the strike price?

Hi all,

I guess I've already learned the answer to this question by trial and error, but I wanted to ask simply to confirm the fact, because I'm new to options and now confused.

I sold a put option on a stock 3 weeks before expiration. The price never fell to or below the strike price, yet I was assigned last Saturday. From my reading, I was under the impression that the option could only be exercised if the price fell to or below the strike. Is that not correct? Can the holder exercise the contract (and take a loss I suppose) even when the price is above the strike price.

Don't get me wrong. I was happy to buy the stock at such a discount. I just didn't expect to be assigned when the holder could have sold easily on the market for %0.50 more per share.

Thanks!

No that is not correct; the option holder has the right to exercise the option no matter the underlying price or when the expiration is.

This also may not of been a loss for the option holder. Most people when they are buying puts and own the underlying, it is to protect against any down side risk. Basically using the option as a "stop loss". Depending on how much premium he paid on it, he may not of wanted to lose that premium so just exercised the contracts.

Ye but remeber he said he sold a put. Meaning he is currently long the shares at the strike price since it was put to him. Remember. Buying options gives you a right. Selling options gives you an obligation. You made the right play. Selling puts to go long gives you a huge advantage over buying calls as the time decay works in your favor. However in weeklies the effect is not as dramatic.

If like you said you dont mind owning the shares for a bit... You might look and see if its worth selling the calls at the same strike. This reduces your cost basis on the shares and if they get called away you will be paid what you paid and get to keep the premium for the calls you sold.

Acstudio said: ↑
Ye but remeber he said he sold a put. Meaning he is currently long the shares at the strike price since it was put to him. .
Nothing I made mention to was in perspective of the option writer. I was speaking purely on the option holder (that individual the bought the put) as he might of thought the individual took a loss. That individual was more then likely long the security and was using the put as a stop loss hedge. This does not designate that the option holder took a lose on that underlying. Still in perspective of the option holder, not the option writer.