Is early assignment likely for this CC?

Discussion in 'Options' started by a529612, Nov 10, 2006.

  1. Long CVX stock @ 69.32
    Short CVX Nov 70 Call @ .36

    Ex-dividend is on Nov 15 for 0.52/shr

    I expect it will trade around 70.5 or so by ex-dividend. Is early assignment likely for this CC? Thanks!
     
  2. Once CVX is above 69.48, assignment is very likely.
     
  3. Is "strike price - dividend" a good rule to determine the price that it makes sense for the call buyer to exercise early?
     
  4. Sure, at that point, it's "free money", and as soon as dividend hits, the stock is going to drop anyway. It's unlikely someone would hang onto a short term near-money call through div-ex unless they just weren't paying attention. :)