AMTD Special Dividend

[quantdropout]

Does anyone know when this (AMTD $6.0) will be paid? Also, check out the number of puts being purchased in 06 1st half.

 

[CONR]

I think early Jan.

 

[Chagi]

Quote from quantdropout:

Does anyone know when this (AMTD $6.0) will be paid? Also, check out the number of puts being purchased in 06 1st half.

Without looking at any of the info about the stock, it does make sense that people would be buying puts on a dividend paying stock in anticipation of it going ex-dividend.

 

[thecalip]

How did it works when you buy put and the company issue a dvidend? Let say the company is trading at $100, and issue a $5 dividend. Does the option traded as the stock is down 5%?

 

[rarhoads]

I know someone that tried this with MSFT and the special dividend a year ago. He was shocked when the strike prices were adjusted along with the dividend being paid. May want to make sure a similar thing won't happen with this.

 

[quantdropout]

Quote from rarhoads:

I know someone that tried this with MSFT and the special dividend a year ago. He was shocked when the strike prices were adjusted along with the dividend being paid. May want to make sure a similar thing won't happen with this.

Thanks for the heads-up. Your correct, evidently the strike will be reduced by 6 bucks.

http://www.optionscentral.com/classes/syllabus_contract_adjustments.jsp

 

[stock777]

See, the big boyz wont let you make a living.

 

[Chagi]

Quote from rarhoads:

I know someone that tried this with MSFT and the special dividend a year ago. He was shocked when the strike prices were adjusted along with the dividend being paid. May want to make sure a similar thing won't happen with this.

Thanks for posting this. I seem to recall this being mentioned in my risk management text (yes, I'm a uni student), but I think that this is determined by the options exchange, i.e. they can choose whether or not to adjust strike prices?

 

[rarhoads]

I honestly don't know who or how that adjustment is determined. I just remembered a friend that runs a hedge fund being very excited about buying MSFT puts in front of the 3 dollar dividend last year. He was under the impression that he was seeing something the rest of the market was missing (that never happens).

Another point regarding this, I am currently involved in several REIT stocks. They pay a heavy dividend, but the option strikes are never adjusted. I assume there may be an explanation on one of the option exchange websites.

 

[Investorsources]

Are you honestly telling me that you had a friend running a hedge fund, and he didnt know that Microsoft would adjust the strike prices downward? Wow. It must not take much to work a hedge fund these days.