Will I Get Dividend If I Sell On Ex-date

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Put Options and the Ex-Dividend Date

Phone call options and put options have been a favorite for investors and speculators akin to hedge their portfolios or to make some quick money off stock cost movements respectively. A layman or a new investor might become overwhelmed by the complexity of these instruments. But if they are understood properly, 1 tin can play special dividend announcements or even 'big payout' ex-dividend dates anticipating a drop in share price past buying put options.

Beneath Dividend.com explains what American and European put options mean and how you lot can profit by playing in put options.

Let's assume the same ex-dividend dates we assumed for the call options and the ex-dividend date analysis. Company ABC Inc. declared a dividend on 2016-03-28 amounting to $0.4410 that has an ex-dividend date of 2016-04-25.

All investors whose names announced on the books of the company as of 2016-04-27 will get the dividend, which will be paid on 2016-05-12. For that to happen, investors/speculators need to buy the stock on 2016-04-24.

A put option, as the proper name suggests, is an 'pick' to sell the stock at a specified strike price up until a certain date. For example: An investor wants the pick to sell ABC Inc. at $100 (strike price) and buys a ane month contract on Jan 1, 2016 that expires on Jan 31, 2016. He pays a premium of $iii to buy this option to the selection seller.

On the expiry date, if the price of ABC is $90 so the buyer of the put pick will profit by $seven since he has the option to sell the shares at $100, but paid $three to buy information technology. The investor tin always do the option before expiry engagement if he/she is already in turn a profit.

On the decease date, if the price of ABC is $110 and so the heir-apparent of the put option will be in loss since he/she has the correct to sell ABC at a price that is below the current market cost.

Put options are the exact contrary to call options. The buyer of a call selection benefits when the stock price rises above the strike price, while the seller of the call option loses. The buyer of the put option benefits when the stock price falls below the strike price, while the seller of the put option benefits when the stock cost stays above the strike toll.

A put choice buyer pays a premium to the put selection seller to purchase an pick to sell the stock at a specified strike price up to the expiration appointment. Options can be European options or American options. American options tin be exercised before the expiration date, while European options can only be exercised on the expiration date. The added feature of selling before the decease appointment for American options makes them more expensive than European options. Virtually options in the US are American.

From the date the dividend is alleged, correct up to the ex-dividend date, the price of the put option volition start ascension in apprehension of a fall in toll, while the price of the call option will start falling. When it's said that the cost of a call option/put option rises/falls, it's really the premium associated with the the options that is ascension or falling.

On the ex-dividend date, the stock cost abruptly falls by the corporeality of the dividend. However, don't look such a abrupt toll movement in their option premiums on the same day. They conform themselves every bit soon every bit the payout proclamation is fabricated. Phone call selection premiums would beginning to fall steadily, while put selection premiums would start to rise steadily.

Discover an analysis of call options and the ex-dividend date here.