Series 7 practice questioneasyOptions — Assignment and Exercise
When an option holder exercises the option, the OCC assigns the exercise notice to:
- AThe exchange where the option trades
- BAll writers of the same series proportionally
- CThe writer who sold the specific contract to the holder
- DA randomly selected writer of the same series on a random basis✓ Correct answer
Explanation
Why D — A randomly selected writer of the same series on a random basis
The OCC uses a random selection process to assign exercise notices to member firms with short positions in that option series. The member firm then uses either random selection or first-in, first-out (FIFO) to assign the notice to a specific customer. The original buyer and seller are not matched.
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