buy npd @3.19 buy may 5 put @2.05 exercise put loss = .24 divend = .60 .60-.24=.36 profit = .36 NO DOWN RISK JUST EXERCISE PUTS AFTER MAY 3RD TAKE THE .24 LOSS AND WAIT FOR THE DIVY OF .60 IN JUN 7!!!!!!
so do the options get adjusted for every stock after a dividend? so lets say the day before the dividend of AGNC the stock closes at $30. Let's say to keep it simple I own the December $35 call option. Since this pays a dividend of $1.25 will that change the option to a strike of 33.75? I am just curious as to how this will work or if nothing will happen to my options at all and they would remain $35 strikes. Any info would be greatly appreciated.
>so do the options get adjusted for every stock after a dividend?
No. Periodic dividends are considered to be priced into the option when the series is opened. Special dividends announced after the options are being traded are commonly but not always adjusted. AGNC is treated as periodic even though it's announced differently every quarter.
1. the moment they announced that div, the price shot up from 2.50, then settled back to 3.10 for a .60 gain, discounting the div entirely, possibly washing out any further div run. on ex-div day, may 3, it will likely drop by .60, possibly more, wiping out the div.
2. Puts are likely to be adjusted just as they were for NPD's .30 special div on January 27 of last year:
so you would exercise those 5's at 4.40 instead. 4.40 - 2.10 = 2.30 in revenue, in return for a share likely to be worth 2.50 at the time? in these parts, we call that a .20 loss on a 3.19+2.10=5.39 outlay. nearly -4% in less than 48 hours.
there might be a couple of shekels in trying to time the pre-div peak, if there's any more room for one to grow. it looks more like it's decaying as people do the math. the specialist who fed the n00b who bought at 3.87 on Friday is probably the winner.