SPY should trade ex divd on Friday morning. Calls should get cheaper, puts more expensive leading into the date. I was wondering what was wrong with the calls today, they got crushed much harder then they should of for the price move.
Impact of Dividend of Options
Both call and put options are impacted by the ex-dividend rate. Put options are more expensive since the exchange automatically drops the stock price by the amount of the dividend. Call options are cheaper due to the anticipated drop in the price of the stock.
Put options gain value as the price of stock goes down. A put option on a stock is a financial contract where the holder has the right to sell 100 shares of stock at the specified strike price up until the expiration of the option. The writer, or seller, of the option has the obligation to deliver the underlying stock at the strike price if the option is exercised. The seller collects the premium for taking this risk.
On the flip side, call options lose value in the days leading up to the ex-dividend date. A call option on a stock is a contract where the buyer has the right to buy 100 shares of the stock at a specified strike price up until the expiration date. Since the price of the stock drops on the ex-dividend date, the value of call options also drops in the time leading up to the ex-dividend date.
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