Dividend risk

Discussion in 'Options' started by ssbc19, May 6, 2008.

  1. ssbc19


    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?
  2. MTE


    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.
  3. JKG


    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.