Dividend on options
If you own shares in a company, it is possible that this company pays dividends to its shareholders. Paying out dividends affects the share price. When dividends are paid out, the share price decreases by approximately the amount of the dividend. The share price then increases again by the amount of dividend until the next dividend payment, the ex-dividend date. But how does this affect options? Read below.
Option value and dividend payments
The price of options is based on the price level of the underlying asset. If shares become less valuable, this affects the level of the option premium. Call options are cheaper as you get closer to the ex-dividend date. This is due to the decrease in the value of the share, which means that you make less profit with a call option. The exercise price will therefore be higher than the price value.
Put options , on the other hand, become more expensive the closer you get to the ex-dividend date. Because the share price decreases, it is more advantageous to sell the shares at the strike price. This will then be higher than the share price, which means you earn more money.
You pay 15% dividend tax on dividends. For more information, Compareallbrokers.com has written an article for you about trading in options and tax.
Who receives dividends from options?
An important question is who will receive the dividend for the shares if you buy or write out options. Dividend transactions often only take place after the ex-dividend date. For this reason, companies keep a record date in which they keep track of who owns the shares on the ex-dividend date. If you want to receive dividend, you must own the shares on this date. Having a call option on these shares is therefore not enough. You must exercise the call option before or on this date in order to receive the dividend. With a put option, the opposite applies. As long as the buyer does not exercise the put option before or on this date, you will still receive the dividend.
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