Explore Your Options by Tom Gentile
DIVIDENDS AND OPTIONS PRICES
How does a companyís dividend affect
the option price? ó Newman
The dividend can be an important
influence on a stock optionís price.
Obviously, if the company pays no dividend,
it makes no difference. However,
all else being equal, a dividend will
lower the value of a call option and
make a put option more expensive.
Why? Because after the dividend is
paid, the share price will fall to reflect
the dividend payment. Further, the fact
that the stock falls after the dividend is
paid makes calls less valuable and puts