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| Option Calculators and Stock Screeners |
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Chapter 3
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| Dividends |
If the underlying stock pays a dividend, the CALL will sell at a discount and the PUT will sell at a premium.
Dividend Yield: When a stock dividend is paid, the price of the
stock is reduced by the amount of the dividend payout. If a call buyer
holds the right to buy a stock in the future, and it is known that the
underlying stock is going to decline in value, then the option will be
discounted by an amount based on when the dividend is paid and the
value of the dividend. The chart below shows the relationship of
a continuously distributed dividend to the price of a call.
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| Option price relative to change in yield |
The Option Calculator shows the effect of a dividend payout on the price of an option.
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| Data Provided by HistoricalOptionData.com |
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