I was short 15 AMD puts at 27.5 Friday afternoon. AMD closed at 27.85. I marked the puts Expired in my spreadsheet. I was surprised Saturday morning to receive notification that 14 of the contracts had been assigned. I checked the after hours trading and it was flat line. Why would anyone sell me stock for 27.50 when they could sell it in the market for 27.85? I have traded thousands of option contracts and never been assigned an OTM option. I typically carry deep in the money puts and have never been assigned early so long as the put still has some time value. Bizarre. Perhaps the best explanation is that someone made a mistake.
Maybe, the buyer decided to exercise it last Thursday when the prices dipped below $27.50. Whatever, his reason, if it is in the money, he can exercise it at any time. Probably, just posted late by your broker. In any case, you did better so, no big deal.
I didn't fare nearly so well as Mr. Morse's client either - AMD traded down at the open and I took a profit of $178.
Question. E.G. You are a Retail or institutional customer. You put on a hedged position last month- +1000 AMD 27.50 puts + long 100,000 AMD. You want to cover on expiration. You are busy, not paying attention, etc, and now it is 4:45 ET on expiration and you are not allowed to be long 100,000 AMD Monday. You either do not have enough funds or it exceeds your risk allowed. What do you do if you can't sell that much stock at that time. One options is take a $0.35 loss, exercise your OTM puts and be done. It happens. And please call me Bob.
A situation like that would never occur to me, Bob. You must have seen about everything there is to see by now.