MSFT calls expiring this week + Dividend

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viewer0
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Joined: Tue Jun 12, 2018 7:46 pm

MSFT calls expiring this week + Dividend

Post by viewer0 » Tue Aug 13, 2019 2:02 pm

I have a bunch of MSFT covered calls, one with strike price $135 and one with strike price $136 expiring 8/18. The stock is trading now at ~$138.50. MSFT goes ex-dividend tomorrow. Can you predict if the option will be called at the end of today. Dividend will be about $0.55.

ohai
Posts: 921
Joined: Wed Dec 27, 2017 2:10 pm

Re: MSFT calls expiring this week + Dividend

Post by ohai » Tue Aug 13, 2019 2:22 pm

I see a dividend of $0.46, if it matters.

Anyway, the 135 call will probably be exercised but not the 136 call. You might get some partial exercise on one or both. One way to estimate this is by checking on the value of the Puts with the same strikes as the calls. If these OTM puts have option value exceeding the dividend, then the call option probably won't be exercised and vice versa.

Topic Author
viewer0
Posts: 81
Joined: Tue Jun 12, 2018 7:46 pm

Re: MSFT calls expiring this week + Dividend

Post by viewer0 » Tue Aug 13, 2019 2:27 pm

"If these OTM puts have option value exceeding the dividend, then the call option probably won't be exercised and vice versa."

good thinking.

Topic Author
viewer0
Posts: 81
Joined: Tue Jun 12, 2018 7:46 pm

Re: MSFT calls expiring this week + Dividend

Post by viewer0 » Wed Aug 14, 2019 6:56 am

As you, predicted , @ohai, The $135 calls got exercised and the $136 calls did not.

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