How Dividends Affect Early Call Exercise
Summary
Hollow Point Trading shares a video explaining how an upcoming cash dividend can affect early exercise incentives for American-style calls. The example uses a $95 strike, a $100 stock price, and a $5.20 call premium to show how $0.20 of extrinsic value factors into the decision—useful context for options traders evaluating dividend dates.
https://youtu.be/ymomEWj_MhI
A dividend can change early exercise incentives #Dividends #EarlyEx...
An upcoming dividend can change a call holder's early exercise incentives. Imagine an American style call with a ninety five dollar strike. The stock is one hundred dollars and the call premium is five dollars twenty cents per share. Intrinsic value is five dollars. The remaining twenty cents is extrinsic value. Suppose an upcoming cash dividend...
