Call options and dividend?

M

mizhael

Let's say I am long some Feb 20 Bank of America calls.

I just noticed that there will be a dividend coming out for Bank of America.

The Ex-date is Jan 28, and the payable date is Feb. 17.

----------------------------

COMPANY AMOUNT EX-DATE PAYABLE RECORD DECLARATION
BankofAmerica $0.256 28-Jan 17-Feb 30-Jan 5-Jan

-----------------------------

It looks like my call is definitely going to get crushed. My question is how bad is that going to be and when will that crush occur? On Ex-Date or on Payable date? Details appreciated!

Any sort of remedies that I can do on my side to reduce my loss?

Thanks a lot!
 
Is this the same BOA that is trading at $6.24? With your call strike at $20, the dividend is the least of your concerns regarding the price of that option.
 
Quote from mizhael:

Any sort of remedies that I can do on my side to reduce my loss?
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If you are referring to future losses for your Feb 20 calls, the good news is that there are no losses <i?based on the fact that the stock is paying a dividend</i>. The dividend is already factored into the price of the option and it will not decline any further (as a result of the dividend).

If you are referring to losses that already occurred, no - there's noting you can do now.

Mark
 
Quote from optioncoach:

Is this the same BOA that is trading at $6.24? With your call strike at $20, the dividend is the least of your concerns regarding the price of that option.
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Oh, I remember in the latest earning release, the dividend has gotten slashed to $0.01. So the data I quoted before must be an error.
 
Quote from dagnyt:

If you are referring to future losses for your Feb 20 calls, the good news is that there are no losses <i?based on the fact that the stock is paying a dividend</i>. The dividend is already factored into the price of the option and it will not decline any further (as a result of the dividend).

If you are referring to losses that already occurred, no - there's noting you can do now.

Mark
More...

Yes, I bought the calls after the earning release. So the dividend info has already been priced in. I see.

So far these calls are still under water. Maybe I should do some position adjustment?
 
Quote from mizhael:

So far these calls are still under water. Maybe I should do some position adjustment?
More...

When your stock is trading in the 6-7 range and your calls have a 20 strike price, AND expiration is nigh, you HAVE NO POSITION TO ADJUST.

Mark
 
Quote from dagnyt:

When your stock is trading in the 6-7 range and your calls have a 20 strike price, AND expiration is nigh, you HAVE NO POSITION TO ADJUST.Mark
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Yes he can! Yes he can! Yes he can! Yes he can adjust his position. You are thinking too negatively. Be an optimist!

Here are some ideas to adjust your position:

a. Rollover to the April 20 strike price.

b. Sell the Feb 20 and buy the April 30 strike price. Open interest is over 30k, so the liquidity should be good.

c. Sell the Feb 20 and buy Jan 2010 50 strike leaps. This option gives you more time.

In ObamaNation, anything can happen.... Maybe even a miracle ;)
 
Quote from stinkyfelix:

Yes he can! Yes he can! Yes he can! Yes he can adjust his position. You are thinking too negatively. Be an optimist!

Here are some ideas to adjust your position:

a. Rollover to the April 20 strike price.

b. Sell the Feb 20 and buy the April 30 strike price. Open interest is over 30k, so the liquidity should be good.

c. Sell the Feb 20 and buy Jan 2010 50 strike leaps. This option gives you more time.

In ObamaNation, anything can happen.... Maybe even a miracle ;)
More...

Selling Feb 20 means I am losing a huge amount of money, isn't it?

Given the banks rally today, I still have some hope?
 
Quote from mizhael:

Selling Feb 20 means I am losing a huge amount of money, isn't it?

Given the banks rally today, I still have some hope?
More...

Well, if you don't want to sell, you could double down and buy more of the Feb 20s...

Optioncoach, Dagnyt where are you guys? A fellow ET'r needs some help. What do you guys think about the double down idea?
 
Quote from mizhael:

Selling Feb 20 means I am losing a huge amount of money, isn't it?

Given the banks rally today, I still have some hope?
More...

If I have to make a bet on seeing the pigs fly or BAC going to $20 before february, I'll take the pigs.
 
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