Dividend Yield In Pricing Options

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.

 

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

 

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.

 

No.

All that is already built into the stock price.

Mark

 

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.

 

No.