Option Calculators and Stock Screeners
Symbol Lookup

chapter3/5 dividends

Chapter 3


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.

Option price relative to change in yield

The Option Calculator shows the effect of a dividend payout on the price of an option.


Data Provided by HistoricalOptionData.com
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