Why Options Writers Cannot Volunteer for Assignment
Summary
The document explains why brokers or exchanges may decline to let option writers volunteer for assignment when holders exercise. Under a broker’s random allocation policy, giving volunteers priority would disadvantage other writers who relied on that policy and did not volunteer, even if they would also welcome assignment.
A volunteer-first system is presented as a possible alternative allocation rule, but it would require additional procedures, reporting, and coordination. The answer argues that firms may avoid those operational costs and the risk of errors, accepting that occasional customers may be disappointed. The discussion is a policy explanation rather than a comparison of formal exchange rules; it does not provide empirical evidence or establish that all brokers use the same process.
Key ideas
- Random allocation can be considered fair when participants are treated equally under the broker’s stated procedure.
- Prioritizing volunteers could disadvantage writers who relied on random assignment and did not register a preference.
- A volunteer-first allocation rule is possible but requires added administration and coordination.
- Broker practices and policies may differ, and the document does not survey them.
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Full text
# Why can't an options writer volunteer for assignment on exercise # Why can't an options writer volunteer for assignment on exercise I'm asking more for a policy perspective. I called the brokerage firms I use and asked about volunteering myself for assignment if a written OTM option becomes ITM and a holder somewhere exercises. In a different question the accepted answer mentioned that the exchanges assign randomly for fairness. I don't see why allowing volunteers wouldn't be fair. Allowing volunteers would decrease the risk for those who don't want an assignment and increase the chance for those who do. I picture something like: when an exercise order is received, assign randomly among volunteers and if the volunteers run out switch to the pool of non-volunteers. The exchange could assign with uniform randomness to a broker and if the broker has no volunteers pick another broker. Alternatively brokers could report their number of volunteers and then the exchange could assign with a probability weighted by that number. ## Answer by Attack68 (score 2, accepted) https://quant.stackexchange.com/a/41659 Under a scenario that the broker firm has specified the protocol as being random assignment, then it is unfair to prioritise your volunteer for assignment ahead of another who would equally appreciate assignment, but who has not volunteered because he believes the company will abide by their random allocation rule, and therefore considers volunteering unnecessary. Whilst your solution is an equally valid rule that could be imposed it is more prone to operational error and is administratively costly. If I ran a broker outfit I would choose not to implement it. Instead, I would run the risk of having to politely apologise to rare disgruntled customers whose volunteering, unfortunately, did them no good.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.