Probability of Short Calls getting assigned before ex-div

N

Neyo

Hi,

so my question is this, and i was hoping someone with more experience in the options market could provide me with:

Supposedly I'm Short a XYZ Call option that is part of an options spread strategy(not important which one). The Short Call has 1 or 2 weeks left to expiration and the price is moving near the Short Calls strike price, and tomorrow is the Ex-Div date. An hour or so before the market closes the price jumps up, just enough that the Time Value is now less then the Dividend received. And let's say that the options are weeklys, so that they are more liquid/more people trading them.

How certain can i be that i will be assigned? from Rarely or Never(0%) to Always(100%)
What if the options were monthly(still the same scenario, Price ITM, Time Value < Dividend, just the option has 1month to expiration as opposed to 1or2 weeks from before).

I'm also assuming that the probability of getting assigned in this scenario is higher, the more Open Interest the option has.

Thank you in advance, to all who will take the time to help me with this.
 
Compare the value of the put on that strike and the cost of carry. EG The dividend is $0.50, put is trading at $0.20 and cost of carry to expiration is around $0.02. You have a high probability of being assigned. THe closer the put value is to the dividend, the lower the chance. In the above example, the vig is $0.28, not including assignment/trading costs.

1245
 
thank you for the reply.
Shouldn't taxes also be entered into that equation? If i'm not mistaken the taxes on US dividends are 25%(correct me if i'm wrong here) so the actual dividend received would be $0.375 instead of $0.50, and the end result in difference from the above example(excluding assignment/trading costs) $0.155(=$0.375-$0.20-$0.02) instead of $0.28, making the exercise much less likely?
 
I'm not an expert on taxes and trading, but I thought the lower rate for dividends is now 20%, up from 15%, and that is only for qualified dividends. Short term trading and hedging might remove the qualified status. No, I would not consider dividends. put value and risk only.

1245
 
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