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+252 Part Ill: Put Option Strategies 
+Dividend payment dates may also have an effect on the frequency of assign­
+ment. For call options, the writer might expect to receive an assignment on the day 
+the stock goes ex-dividend. The holder of the call is able to collect the dividend by 
+so exercising. Things are slightly different for the writer of puts. He might expect 
+to receive an assignment on the day after the ex-dividend date of the underlying 
+stock. Since the writer of the put is obligated to buy stock, it is unlikely that any­
+one would put the stock to him until after the dividend has been paid. In any case, 
+the writer of the put can use a relatively simple gauge to anticipate assignment near 
+the ex-dividend date. If the time value premium of an in-the-money put is less than 
+the amount of the dividend to be paid, the writer may often anticipate that he will 
+be assigned immediately after the ex-dividend of the stock. An example will show 
+why this is true. 
+Example: XYZ is at 45 and it will pay a $.50 dividend. Furthermore, the XYZ July 50 
+put is selling at 5¼. Note that the time value premium of the July 50 put is ¼ point 
+- less than the amount of the dividend, which is ½ point. An arbitrageur could take 
+the following actions: 
+1. Buy XYZ at 45. 
+2. Buy the July 50 put at 5¼. 
+3. Collect the ½-point dividend (he must hold the stock until the ex-date to collect 
+the dividend). 
+4. Exercise his put to sell XYZ at 50 ( writer would receive assignment on the day 
+after the ex-date). 
+The arbitrageur makes 5 points on the stock trades, buying XYZ at 45 and selling it 
+at 50 via exercise of the put. He also collects the ½-point dividend, making his total 
+intake equal to 5½ points. He loses the 5¼ points that he paid for the put but still 
+has a net profit of ¼ point. Thus, as the ex-dividend date of a stock approaches, the 
+time value premium of all in-the-money puts on that stock will tend to equal or exceed 
+the amount of the dividend payment. 
+This is quite different from the call option. It was shown in Chapter 1 that the 
+call writer only needs to observe whether the call was trading at or below parity, 
+regardless of the amount of the dividend, as the ex-dividend date approaches. The 
+put writer must determine if the time value premium of the put exceeds the amount 
+of the dividend to be paid. If it does, there is a much smaller chance of assignment 
+because of the dividend. In any case, the put writer can anticipate the assignment if 
+he carefully monitors his position.