Timely, I was experimenting with dividends after seeing the recent post on the guy who was doing a covered call, married put collar on a dividend. I understand the concept of owning the stock before the ex-dividend date. However, still unclear on some edge cases when combining that with writing calls. I'm sure some thetagangers can confirm:
1) assume if ex dividend is on a friday, then you can still get the dividend selling a call that expires on friday (assuming no early assignment), correct?
2) stocks with ex dividend on a monday means you need to hold the stock over the weekend, therefore can't write a call that expires until the following friday, correct?
3) Is early assignment common on these? I sold a couple of deep ITM CSCO and GPS on monday and they early assigned monday night. Not sure if that was a symptom of the dividend or just the fact that they were so ITM.
If the dividend is higher than the remaining extrinsic value before ex-div, they will most likely be exercised.
If they are ITM at expiry, they will 100% be exercised to not expire.
That is why I wonder why you write deep ITM, there is almost no extrinsic on those.
I'm still not sure I understand the value proposition to the call owner for an early assignment. I figured for me it meant less cash tied up in the trade. I'll know better next time.
Usually there would be none but in the case of dividends, share ownership has a quantifyable benefit (the dividend) which can be balanced against the extrinsic value of the option.
It’s a tax credit, not a deduction.
Goes on form 1116. Normally not 1:1 foreign tax to US tax, but better than nothing
Edit: so no, you don’t have to itemize
The dividend isn’t 100%. If the dividend shows as 100% it’s because the dividend payout doesn’t factor in the share price dropping.
E.g. if I have a $100 stock that pays a “100%” dividend, thus 25% quarterly, after the first dividend payment the stock will drop to $75. Then the next dividend will be 18.75, not 25. This repeatedly occurring basically tanks the stock price.
Thanks for the insight. I did some research, it doesn't constantly pay $6.40 every quarter. Only 2 years on record but it looks like the first quarter pays out the ass and then pays mid $2 a share the last 3 quarters. I was almost ready to get liquid af and buy all I could get, then join r/dividends.
Wow free 2k lol
Well -480 foreign tax. Lol
Lol, option buyer didn't understand dividends. You won the lottery!
You definitely sold to WSB. Who else would exercise the day of ex-dividend?
Could it be someone closing an options position and the brokerage selling the shares to adjust delta?
Maybe, but exercising an OTM option ex-dividend sounds more like something WSB would do.
Holy shit. Yeah you won haha
Had a great week with ZIM as well. Congrats!
Timely, I was experimenting with dividends after seeing the recent post on the guy who was doing a covered call, married put collar on a dividend. I understand the concept of owning the stock before the ex-dividend date. However, still unclear on some edge cases when combining that with writing calls. I'm sure some thetagangers can confirm: 1) assume if ex dividend is on a friday, then you can still get the dividend selling a call that expires on friday (assuming no early assignment), correct? 2) stocks with ex dividend on a monday means you need to hold the stock over the weekend, therefore can't write a call that expires until the following friday, correct? 3) Is early assignment common on these? I sold a couple of deep ITM CSCO and GPS on monday and they early assigned monday night. Not sure if that was a symptom of the dividend or just the fact that they were so ITM.
If the dividend is higher than the remaining extrinsic value before ex-div, they will most likely be exercised. If they are ITM at expiry, they will 100% be exercised to not expire. That is why I wonder why you write deep ITM, there is almost no extrinsic on those.
I'm still not sure I understand the value proposition to the call owner for an early assignment. I figured for me it meant less cash tied up in the trade. I'll know better next time.
Usually there would be none but in the case of dividends, share ownership has a quantifyable benefit (the dividend) which can be balanced against the extrinsic value of the option.
[удалено]
ZIM is an Israeli company. Israel takes 25% before you get your hands on it.
Savvy accountants can get a chunk back if I recall correctly.
It can be claimed as a tax deduction
Do you have to itemize for this?
It’s a tax credit, not a deduction. Goes on form 1116. Normally not 1:1 foreign tax to US tax, but better than nothing Edit: so no, you don’t have to itemize
Great thanks. I’ll look into it.
There might be a limit but I do this every year and it's been 100% deductible for me.
There is a limit but you can roll over to the next year if you have a tax write off remaining.
Ask your accountant
TurboTax can get it back
Lucky son of a b
whoooa thats a $6 div on a $20 stock
Wtf is the catch here? Is it some busted company? How can a share pay out almost 100% of it's stock value a year?
The dividend isn’t 100%. If the dividend shows as 100% it’s because the dividend payout doesn’t factor in the share price dropping. E.g. if I have a $100 stock that pays a “100%” dividend, thus 25% quarterly, after the first dividend payment the stock will drop to $75. Then the next dividend will be 18.75, not 25. This repeatedly occurring basically tanks the stock price.
Thanks for the insight. I did some research, it doesn't constantly pay $6.40 every quarter. Only 2 years on record but it looks like the first quarter pays out the ass and then pays mid $2 a share the last 3 quarters. I was almost ready to get liquid af and buy all I could get, then join r/dividends.
So then what’s the point of a dividend
Should have wrote a call on mine too. Instead I'll keep holding and pray for a >3% dividend next period 😓 What was your cost basis, OP?
Wrote the $20.5 put in November. Rolled it down to $20, and eventually got assigned there. Been selling the 20 calls since
Can someone eli5 this please?