buy put buy stock div play

C

chiguy

feel free to flame at will as i should remember this in my sleep...

what is the equation for buy put, buy stock to capture a large upcoming dividend...

thanks in advance...
 
Quote from chiguy:

what is the equation for buy put, buy stock to capture a large upcoming dividend...
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I'm not sure what you mean? The market should have priced the dividend into the value of the puts thus making them appear massively expensive, IV-wise. Or did I misunderstand the question?
 
there is no free money doing this as in theory the stock will drop by the div amount and so will the value of the put on the ex div day.

are you thinking of the formula for when it is profitable to early exercise ITM options?
 
i understand the concept of the 100 delta put...

i was looking at a scenario today and couldn't figure out why the prices were where they were...

i have since gotten rid of the cobwebs and old bong juice and figured it out...

strike * long rate * days till experation - dividend...

no straight put vs stock unless their is a discount...duh...

sorry for the confusion..

thanks for the help...
 
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