I'm looking to buy a May put on a stock which has a dividend soon. When I pull the order up in TOS it shows max loss followed by "plus dividend risk". How exactly does that work?
If you buy a put then there's no dividend risk. The dividend is a problem only with short ITM calls. I think the statement is always there.
the dividend has been priced in puts. The extrinsic value can never be smaller than dividend. You will lose this extrinsic value once on ex-div date.