So I have two covered calls on CAR Jan 21 $210. The stock dropped about $9.50 today. I really don't want it to get called away. I was even thinking of buying back the option, then write another covered call. Then this happened tonight!! Avis Budget Group, Inc. today announced the declaration by its Board of Directors of a special cash dividend of $10.00 per share of common stock. The special cash dividend is payable on December 21, 2023 to stockholders of record as of the close of business on December 15, 2023. Since it is a special dividend, I am NOT entitled to it. Such is life...
HAAAAAAAAAAAAA!!!!!!! There is a pattern; peak/trough being formed every month. And the oscillations are getting smaller and smaller. Today, the price is midway between the peak and trough.
I think you WILL be payed the special dividend. You own the stock even if you're short the call. Option holders never receive dividends. ***I reserve the right to be wrong.
About 20 plus years ago this happened to me. ALL regular dividends I would keep...Special dividends go to the option holder (unless things have changed).
The more I think about it the more I think you are correct. I will get the special dividend. The $10. will go toward the option when and if it gets exercised. So instead of $210. it will be treated like $200. Again, about 20 years since this happened to me...
With more than a month before expiration of the option after the special dividend, the stock would need to be trading a good distance above 210 for someone to exercise the option early. Very unlikely. ***BTW, option holders have never received dividends IMO.
What are the possible long-term implications of announcing a special dividend for the overall value of CAR shares?
First of all, your options won't get called away when there is a drop in the stock price. Quite the opposite, you will be able to keep all of the premiums on the short call. Second, as long as you still own the shares of the company that declared the special dividend by the record date, Dec. 15, 2023, you will get the dividend. A special dividend is no different from a regular dividend in terms of the payment of it unless it comes with a specific payment arrangement. The only reason why it's called a special dividend is that it's an extra dividend that's not regularly scheduled. However, whether you really will get paid this special dividend is going to depend on the option holder that you sold the call option to. Your call option is an American option which means it can be exercised at any time before its expiration date. Whether it will be exercised will depend on how large is this special dividend. If it's large enough that it's going to allow the option holder to cover its strike price + the purchase price of the option and the profit from selling it, then the option holder will have the incentive of exercising it early to get the stock to get the special dividend and your option might be called away. So as of right now, you are still entitled to get the special dividend; nobody will be exercising the option because its strike is larger than the market price of the stock but you never know whether you will still end up getting the special dividend at the end especially if the future price of the stock price goes up higher than the strike by the record date of Dec. 15, 2023. Everything will depend on how the price goes from now until Dec. 15, 2023. From its current price to your strike, it's going to be a 11% jump to entice somebody to exercise the option to get the special dividend which is paying a return equivalent to a 3-month T-Bill.
These are just my thoughts... PE Ratio (TTM) 4.15 EPS (TTM) 45.56 They can't keep it up. These profits are from the chip shortage. They are charging a bundle for their rental cars...And getting it. They would then turn around and sell the cars for a much higher price than what they bought them for. In the news wire, it also said they have bought back some of their stock...And will (may) buy back more. A couple years ago this was a meme stock. You look at the wild swings (during the pandemic) and you could see the price all over the place. I believe the earnings and P/E will come back to normal...Used car prices are dropping. I think they wanted to do this to reward their employees, who bought stock over the years. But then you look at the option premiums!! Good money to be made doing leaps way out of the money (which is what I did)...And what I will do, if it doesn't get called away.
I typed this in on Google...Again this has happened to me before. "Do option strike prices get adjusted for special dividends?" Most frequently, the strike price of your option will be adjusted lower to reflect the amount of the special dividend. For example, a one-time cash payment of $5 could turn your 25-strike call into a 20-strike call.