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Dividends don't play into call options.
If you sell a covered call and it expires worthless, you'll receive any dividends from the stock because you still own the stock. If it's exercised, the new owner receives them because the stock is hers now.
The money that changes hands when you sell a call is the "premium," and the person who sells the call gets that.
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∙ 12y ago
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Call option and put option?
A call option allows its purchaser to buy ("call in") stocks at a certain price on a certain date--say, 100 shares of Walmart for $50 on November 1. A put option allows its purchaser to sell ("put") stocks on a certain price for a certain date. The seller of the option has to buy them (in a put) or sell them (in a call) if the option is exercised.
When do you sell a call option?
There are a couple of times you'd do it. The first is if you want to automatically lock in a gain. Let's say you have a stock you bought at 15, and you want to double your money on the investment. So you sell a call at 30 with a long expiration date...oh, maybe a year. If at any time the stock crosses the $30 threshold, you exercise the option. You can also use short calls and long puts (sell a call, buy a put) as a hedging strategy. And then there's the call you sell when you just want to make money by collecting premiums--you sell a call at a higher price than you think the stock will reach, and hope it doesn't go that high.
If a itm call option is 9 and the share is trading at 10 it is itm but why do you say that a 9 put is otm if the share price is 10 what is the history to this seemingly inconsistancy?
When a stock is at $10, a $9 strike price call option allows you to buy that stock at $9, which is $1 cheaper than the market price, hence it is in the money (ITM).Now, when a stock is $10, a $9 strike price PUT OPTION allows you to SELL that stock for $9 when you can actually sell it for $10, so there's no value in it, right? (why would anyone want to sell a stock at $9 when he can sell it for $10, right?) That is why it is out of the money (OTM).It is not an inconsistency but that you did not understand that options moneyness for call and put options are the reverse.
Difference between put option and call option?
The holder/purchaser/owner of a call option contract has the right to buy an asset (or call the asset away) from a writer/seller of a call option contract at the pre-determined contract or strike price. The holder/purchaser/owner of a call option contract expects the price of the underlying asset to rise during the term or duration of the call contract, for as the value of the underlying asset increases so does the value of the call option contract. Conversely, the write/seller of a call option contract expects the price of the underlying asset to remain stable or to decline. The holder/purchaser/owner of a put option contract has the right to sell an asset (or put the asset) to a writer/seller of a put option contract at the pre-determined contract or strike price. The holder/purchaser/owner of a put option contract expects the price of the underlying asset to decline during the term or duration of the put contract, for as the value of the underlying asset declines the contract value increases. Conversely, the writer/seller of a put option contract expects the price of the underlying asset to remain stable or to rise.
What is the proper way to sell call options to protect a long stock position?
A call option is the right to buy a specific stock at a set price (known as the strike price). for this "Right" to lock in a price, the option buyer pays the seller (also known as the grantor) money which is known as the Option Premium. Now here's where most folks get tripped up . . . You can enter the market by Buying the call (go long) or selling the call (grant, go short, or sell). If you buy the call, your risk is limited to the money that you paid the seller, i.e. the Option Premium. Your potential profit is unlimited, in the sense that if you hold the right to buy Apple at $500, you would continue to make money provided Apple continues to rise. However, if you are the seller or grantor - you sell a call - your profit is now limited to the Option Premium that you received, and your risk is unlimited. By selling the option you have essentially made a price guarantee on a stock in exchange for a lump sum payment - the option premium. So some investors utilize what is called "Covered Calls." They buy the underlying stock, say 1000 shares of apple. They are now "long" apple. Next they "Grant" (sell) call options against their long apple position. They receive the "option Premium" on the calls from the buyer, which is credited in their account. They are now long the stock, and short the call options. If apple stays the same or goes down, they owe the option purchaser nothing, and get to keep his money (option premium) once the options expire. If the price rises, the grantor is a loser on the option, but is covered by his long apple stock position, example - if he bought Apple at 400 and then granted Call options against it at a strike price of 400, if apple goes to 500 he essentially takes his winnings on his Apple Stock, and passes them (covers) his call option losses. So to clarify, your answer by selling calls against a long stock position, you lock in the option premium, which could essentially act as a limited cushion in the amount of that premium, should the stock price remain unchanged or fall in an amount of less than the option premium received.
What time can you sell shares to qualify for the dividend?
You can sell shares to qualify for the dividend on or after the ex-date (ex-dividend date), which will be announced the company
Call option and put option?
A call option allows its purchaser to buy ("call in") stocks at a certain price on a certain date--say, 100 shares of Walmart for $50 on November 1. A put option allows its purchaser to sell ("put") stocks on a certain price for a certain date. The seller of the option has to buy them (in a put) or sell them (in a call) if the option is exercised.
If you sell a stock on the ex dividend date do you still get the dividend?
yes!
What is the option to sell shares of stock at a specified time in the future called?
It's actually called a call option. I will provide you with a definition I just found for this, and some additional tips on options trading. - - - - - The option to sell shares is a put. The option to buy them is a call.
If an investor buys stock on the ex-dividend date will that individual receive the dividend?
No, the definition of ex-dividend date is trading without the dividend. Any stock purchased "ex-dividend" date is not entitled to the dividend. AND equally as importantly OFFSETTING this - is the insatnt that happens the stock price is reduced by the amiunt of the dividend being paid. NO you cannot "steal" a dividend - that is buy it the day before the divideden gets paid (or ownership date actually) - and sell the day after - all you do is get the dividend and the equally lower stock value.
What is sell a covered call?
A covered call means that you own the underlying stock on the option you are selling. Say you own 100 shares of apple computer. You sell ONE call option which allows the buyer of the option to purchase the underlying 1oo shares of stock at the strike price. If the contract matures, you can then deliver the stock to the option buyer.
Can you sell the stock after ex-dividend date or after record date?
You can sell the stock whenever you want, but you need to own it on the date of record to get a dividend. That means you need to buy it BEFORE the ex-dividend date.
Can you sell the stock after ex dividend date or after record date?
if you sell shares on ex div. date,before the record do you still receive the dividend
When must a long call option be sold to collect the premium?
Whenever you want. You collect the premium at the time you sell the call.
What is special cum dividend?
After a share has been marked ex-dividend, and before the payment date, shares can be bought with the dividend if you can find a counterparty who will sell them to you in this manner. Equally shares can be bought and sold ahead of the ex-dividend date, "Special Ex" ie without the dividend.
What is excersing a option?
Exercising an option means exercising your rights to buy or sell the underlying asset in accordance to the parameters of the option. When you exercise a call option, you will get to buy the underlying stock at the strike price no matter what price the stock is trading at in the market. When you exercise a put option, you will get to sell the underlying stock at the strike price no matter what price the stock is selling at in the market. In both cases, the option you own disappears from your account.
What is difference between growth fund and dividend fund?
Equity funds usually offer three options for investors to choose from - the Dividend Payout option, the Dividend Re-investment option and the Growth option. A few funds have also started to offer a Bonus option. These options differ only in their method of distribution of returns. When you choose the dividend option, you get to partially cash in on the returns earned by the fund from time to time, through the dividends it declares. When you choose the growth option, the returns earned by the fund are retained and reflect as an appreciation in the fund's Net Asset Value (NAV). Please note that the dividend does not in any way, add to your returns from the fund. The Dividend Re-investment option authorises the fund to plough back the dividends declared into the fund at the prevailing NAV, fetching you more units. In terms of its effect on your returns from the fund, the Dividend Re-investment option is no different from the Growth option. The Dividend Re-investment option is the superior option for investors who want the tax efficiency of the dividend option and are also willing to remain invested in equities through its ups and downs. If they need liquidity, such investors can liquidate a part of their holdings at NAV. To illustrate how these options work, let us suppose you invested Rs.1000 in a fund at an NAV of Rs.10 per unit, fetching you 100 units. Six months later, because of an appreciation in the fund's portfolio, the value of the units you hold has grown to Rs 1,200. In the Dividend option, the fund may declare a dividend of Rs 2 per unit and pay out Rs 200. The value of your residual holdings in the fund would be Rs 1000. In the Growth Option, you would not receive any payout, but the value of your holdings would be Rs 1,200 at the end of six months, as the value of the100 units you hold would have grown from Rs 10 to Rs 12 per unit. In the Dividend Re-investment option, the Rs 200 declared as dividends would be reinvested in the fund at the prevailing ex-dividend NAV, and you would be left with 120 units worth Rs.10 each. Your investment value at Rs 1,200, would be the same as in the Growth option. The Dividend option (whether Reinvestment or Payout) is the more tax- efficient way of receiving your returns from an equity fund. The dividends declared by an equity fund (funds with over 50 per cent equity exposure) are exempt from distribution tax and are also tax-free in the hands of an investor. But any returns that you earn on the fund by way of appreciation in NAV, is subject to capital gains tax. Capital gains are taxed at 10 per cent if you hold the fund for less than a year; but are exempt if you hold for over one year. In the above example, if you opted for Dividend Payout, you would have no tax liability at the end of the six-month period. The same would hold good of the Dividend Re-investment option. However, if you sell your units in the Growth option at the end of the six-month period, you would have to pay short term capital gains tax of 10 per cent on the Rs.200 you earned by way of appreciation on the Growth Option NAV. Tax reasons apart, choosing the Dividend Option may also confer other advantages for conservative investors. Equity funds declare dividends only from the profits booked on the holdings in their portfolio. They have tended to pay out liberal dividends when the stock markets are in a buoyant phase and refrain from payouts when the markets are in a bearish phase. Dividend payouts thus offer you the opportunity to cash in partially on any returns that the fund has made, after a sharp run-up in stock prices. Dividend payouts also help you re-balance your equity holdings when the markets are buoyant, guarding you to an extent against a decline in values. The flip side in opting for the Dividend Option is that they could result in an opportunity loss in a rising market. In the above example, if the NAV of the fund climbed from Rs 12 to Rs 15 per unit after the dividend declaration, investors who opted for Dividend Payout would have suffered an opportunity loss on the Rs 200 that they have pulled out of the fund by way of dividend. Their appreciation would be restricted to the Rs 1,000 they have invested in the fund. In contrast, investors who have opted for the Growth and Dividend Re-investment option would have earned an appreciation on the entire sum of Rs 1,200 that they retained in the fund.
