AAPL CC going ITM call away risk before ex date?

T

turkeyneck

I sold a AAPL May 12 152.50 CC. The stock is going ex-dividend on May 10. The CC is OTM at the moment but I have a hunch the CC will go ITM before the ex date (0.42 delta). How likely will the stock get called away before the ex date by the call buyer for dividend capture? I've heard as long as the call still has time premium, it makes no sense for the buyer to exercise early. Any thoughts? Thanks.
 
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They general formula used is to compare the dividend to the value of the put on that same strike. If the put has a lower value, which is what you lose by exercising early, there is value in doing the exercise. The odds of being assigned increase with lower put value. Open interest would be important too if the values are close. The higher the OI, the less chance of assignment.
 
Robert Morse said:
They general formula used is to compare the dividend to the value of the put on that same strike. If the put has a lower value, which is what you lose by exercising early, there is value in doing the exercise. The odds of being assigned increase with lower put value. Open interest would be important too if the values are close. The higher the OI, the less chance of assignment.
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The dividend (0.63) is lower than the same put @ ~1.4. So the call away risk is not high at the moment when the stock is ATM or slight ITM?
 
Correct. A market maker will look at that exercise as selling the put for $0.63 not including interest. It would be to your benefit to loose the stock that way today. You can go out and sell that put for a higher price and have a similar position.
 
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