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American Capital Agency Corp. Message Board

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  • yourbestfriendintheworld yourbestfriendintheworld Jan 5, 2011 12:31 PM Flag

    short and dividend

    Okay, but the usual meaning of "repricing" is changing the strike price so that the options' premium stays about the same.

    And yes, the fact that these dividends are periodic seems to be more important than their size in the CBOE's determination not to take action.

    But, are you saying that someone other than the buyers and sellers of the options is changing the premium by discounting them by the size of the dividend? If it's the CBOE then where do they announce that, adn if it's not them then who is it?

    Since the CBOE doesn't interfere, the market will set the price according to the expectation that the dividend will change the value every three months until the option expires. That effect should appear in the premium as soon as the market starts trading the options, hence the variant pricing models.

 
AGNC
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