8/28/2023 0 Comments Dividend capture strategyMany a times, stock price gap up or down following the quarterly earnings reportīut often, the direction of the movement can be unpredictable. Buying Straddles into Earningsīuying straddles is a great way to play earnings. Difference between a Futures Contract and a Forward Contract.Bull Call Spread: An Alternative to the Covered Call.Investing in Growth Stocks using LEAPS®.All the profit attainable from this strategyĬomes from the dividend payout - which is $150. Loss on the long stock position while buying back the call for $870 resulted inĪ gain of $150 on the short option position. Selling the stock for $4850 results in a $150 Payout, the options trader decides to exit the position by selling the long stockĪnd buying back the call options. Similarly,Ĭall option also dropped by the same amount to $8.70.Īs he had already qualified for the dividend On ex-dividend date, the stock price of XYZ drops by $1.50 to $48.50. An options trader decides to playįor dividends by purchasing 100 shares of XYZ stock for $5000 and simultaneously While a DEC 40 call option is priced at $10.20. One day before the ex-dividend date, XYZ stock is trading at $50 In November, XYZ company has declared that it is paying cash dividends of $1.50 Hence, you should ensure that the premiums received when selling the call optionsĬosts that will be involved in case such an assignment If assigned, you will not be able to qualify for theĭividends. The risk in using this strategy is that of an early assignment taking place before Then sell the underlying stock, buy back the short calls at no loss and wait to The same drop since deep-in-the-money options have a delta of nearly 1. ![]() Will have drop by the dividend amount, the written call options will also register Takes place, you will have qualified for the dividend. ![]() On ex-dividend date, assuming no assignment The call strike price plus the premiums received should be equal Paying stock while simultaneously writing an equivalent number ofĬall options on it. On the day before ex-dividend date, you can do a covered write by buying the dividend There is, however, a way to go about collecting the dividends using options. Payout only to find that the stock price drop by at least the amount of the dividendĪfter the ex-dividend date, effectively nullifying the earnings from the dividend To buy the the shares just before the ex-dividend date simply to collect the dividend You are holding on the shares before the ex-dividend Some stocks pay generous dividends every quarter.
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