ITM Stocks Going Ex Div

Discussion in 'Options' started by Arnie Guitar, Nov 17, 2021.

  1. I've got an ITM stock going Ex Div.

    I'm not sure how to ask this question.
    I do know that there's no free lunch.

    If a stock is ITM and going Ex Div, does it make a difference how far out the option is?
    Is a stock more likely to be called away if the option is closer in than farther out?

    Let's say it's ITM by a buck, and the dividend is 25 cents.

    Does it matter if the option is next week or 6 months out for it to be called away?
     
  2. Robert Morse

    Robert Morse Sponsor

    Look at the value of the put on the same strike as your call. If the put is less than the Dividend amount, you are at risk of assignment before ex-Dividend.
     
    FSU and zdreg like this.
  3. The farther out the expiration date, the higher the Put value.

    So if a Call is expiring this Friday, this Friday's same strike Put will be much less value than the same strike Put 6 months out.

    So the farther out the expiration, the less likely assignment is because the value is higher farther out?