European with option return vs put dividend


The payment of dividends for a stock has an important impact on how options for that stock are priced. Stocks generally fall by the amount of the dividend payment on the ex-dividend date. This impacts the pricing of options. Call options are less expensive leading up to the ex-dividend date because of the expected fall in the price of the underlying stock. At the same time, the price of put options increases due to the same expected drop. The mathematics of the pricing of options is important for investors to understand in order to make informed trading decisions.

Just as there are two different types of options ( puts and calls), so there are two main styles of options: American and European. Many rookies have suffered unnecessary losses because they were unaware of the differences. Among the broad-based indices, only limited indiCash dividends issued by stocks have big impact on theiroption prices. This isbecause the underlying stock price is expectedto drop by the dividend amount on the ex-dividend date.Meanwhile, options are valued taking into account the european put option with dividend vs return dividends receivablein the coming weeks and months up to the option expirationdate.

Consequently, options of high cash dividend stocks have lower premiumcalls and higher premium puts.Effect on Call Option PricingOptions are usually priced with the assumption that they are onlyexercised on expiration date. An option of exercise is always an option. It looks contradicting.Am I right, and should I just treat above quote to be wrong.




European with option return vs put dividend

European put option with dividend vs return