Dividend Yield In Pricing Options

Discussion in 'Options' started by Giri, Sep 25, 2009.

  1. Giri

    Giri

    Hi Guys,

    When pricing an option that expires in 30 days in which period no dividends will be paid, should you include a number in the dividend yield field? However, the stock will pay a dividend but just not in the specified time period.

    I downloaded an excel spreadsheet that calculates theoretical options prices and I was curious as to whether I should include a value here or not.

    Thanks for your help guys.
     
  2. timbo

    timbo

    If the dividend doesn't exist, why price it?
     
  3. PetaDollar

    PetaDollar Moderator

    The fact that a dividend will be paid in the future increases the demand for the stock, all else being equal. I think then it makes sense theoretically for the calls to be worth a little more and the puts a little less. Whether the difference would ever be 0.01, I have no idea.
     

  4. No.

    All that is already built into the stock price.

    Mark
     
  5. I doubt that a dividend a month or more from now is going have much of an effect on current stock demand. It will have no effect on the pirce of the current month's options.
     
  6. nitro

    nitro

    No.