Dividend and options valuation question

Discussion in 'Options' started by a529612, Jul 25, 2007.

  1. How do you value an option when the underlying will go ex-dividend during such period? Do all strikes have the dividend amount factored into the option price already?

    For example, the CVX Aug 85 Put is selling at .55/.65 bid/ask. CVX stock will go ex-dividend sometime in Aug with a 0.58 dividend. How much of that is reflected in the current .55/.65 bid/ask if you are thinking about selling put?

  2. It's all there. Dividends seem to make put-options look "expensive" and to make call options appear "cheap" if you're not aware of the impending dividend payout.