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Do dividends affect options trades?

Do dividends affect my option trades? What about special dividends?

Regular Dividends and Call Spreads

The only time you need to worry about ex-dividend dates causing early assignment is when you have sold a call option that is in-the-money during the couple of days prior to an ex-dividend date. For in-the-money call spreads, ex-dividend dates must be watched carefully since there is a chance of early assignment on the short call option to capture the dividend. See also Am I going to get assigned?

Regular Dividends and Put Spreads

In contrast, for put spreads any regular dividends are built into the put option prices, and there is no material price change when a stock goes ex-dividend. Nor is there a materially increased chance of early assignment on the short put.

Special Dividends

Special dividends are “unanticipated,” and consequently can’t be built into the option price as you place the trade. If a special dividend is issued during the life of your trade, the Options Clearing Corporation will adjust your option strike prices by the amount of the special dividend. So special dividends have no detrimental effect on option spreads (neither puts nor calls).

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