Seeking Alpha
  • kingShehi
    Am I missing something obvious? If $COST is paying $7 in special dividend on Dec 18th isn't this a no-brainer to short?
    11/30/12
    Reply (12)
    • weed: If you short the stock before the ex-date don't you have to pay the div?
      11/30/12
    • FortSumter: yes. i was wondering if the same is true for holding puts. it would make sense for it to be.
      11/30/12
    • weed: Fort, I believe options get repriced to reflect the payout amount, so it's not easy money.
      11/30/12
    • Ocean Man: Yes, shorts have to pay the dividend.
      11/30/12
    • Dr. Kris: weed: You are correct, sir. I found that out the hard way.
      11/30/12
    • kingShehi: I was referring to playing it with options bear put spread or bear call spread. Shorting str8 is insane-been there done that!
      11/30/12
    • Ocean Man: I know option prices get adjusted for special divs over a certain amount, but not smaller ones. Don't know where the line is drawn.
      11/30/12
    • kingShehi: I am showing Dec22 105 @ ~2.32 Also the put/call ratio seems to be 2/1
      11/30/12
    • Dr. Kris: OM: It depends on how significant the dividend is.
      11/30/12
    • losbronces: Look at SDRL Jan 2013 options, you will see those were adjusted for the 0.15 spec divi from May 22. Thats how it works.
      11/30/12
    • Ocean Man: Good example los, thanks. Short answer is there is no free money.
      11/30/12
    • kingShehi: So I guess $COST was easy money after all with a bear call spread.
      12/6/12
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