![]() ![]() Plus, the above example took place in what's essentially a lab environment, where we assumed the dividend payout was the only factor moving the stock and option prices. That's why the dividend capture is best-suited for institutional investors and other deep-pocketed players who can afford to trade shares and contracts in bulk. That's why this strategy is called the "dividend capture."īear in mind that the $100 profit doesn't account for brokerage fees or transaction costs, and there are at least four transactions involved. Netting it all out, you've collected $1,500 and paid $425 for a total of $1,075.Īfter subtracting your cost of $975 to enter the position, your total gain is $100 - the exact amount of the dividend payout. The sold call can then be bought to close for $4.25, or $425 (again, accounting for the 1-point drop in the share price). The stock price will have dropped by $1 per share as result of the payout, which means you can sell your stake at $14 per share - or $1,400 total. The next day, when the stock goes ex-dividend, you'll collect $100 in dividend payments. The net outlay to enter the position is $975. Assuming this option is worth $5.25, you'll rake in $525 for the sale of the option, while shelling out $1,500 for the purchase of the stock. ![]() To take advantage, you could buy 100 shares of XYZ and write a 10-strike call. ![]() The call options should be in the money by a healthy amount to ensure they move in close concert with the underlying shares.įor example, let's say XYZ is trading at $15, and it's about to go ex-dividend for $1.00 per share. To play the dividend capture, you'll buy shares of a stock just ahead of the ex-div date, and simultaneously write covered calls against those shares. This options tactic is an arbitrage play, as it's meant to capitalize on minor pricing blips that occur as the result of stocks going ex-dividend. Our online platform, Wiley Online Library () is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities.Have you ever noticed a stock getting swarmed with heavy call selling activity just ahead of its ex-dividend date? If so, it's possible that you're witnessing the execution of a dividend capture strategy. With a growing open access offering, Wiley is committed to the widest possible dissemination of and access to the content we publish and supports all sustainable models of access. Wiley has partnerships with many of the world’s leading societies and publishes over 1,500 peer-reviewed journals and 1,500+ new books annually in print and online, as well as databases, major reference works and laboratory protocols in STMS subjects. Wiley has published the works of more than 450 Nobel laureates in all categories: Literature, Economics, Physiology or Medicine, Physics, Chemistry, and Peace. has been a valued source of information and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations. Our core businesses produce scientific, technical, medical, and scholarly journals, reference works, books, database services, and advertising professional books, subscription products, certification and training services and online applications and education content and services including integrated online teaching and learning resources for undergraduate and graduate students and lifelong learners. Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research professional development and education. ![]()
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