15 lines
917 B
Plaintext
15 lines
917 B
Plaintext
CHAPTER 8
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Dividends and Option Pricing
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Much of this book studies how to break down and trade certain components
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of option prices. This chapter examines the role of dividends in the pricing
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structure. There is no greek symbol that measures an option’s sensitivity to
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changes in the dividend. And in most cases, dividends are not “traded” by
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means of options in the same way that volatility, interest, and other option
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price influences are. Dividends do, though, affect option prices, and
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therefore a trader’s P&(L), so they deserve attention.
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There are some instances where dividends provide ample opportunity to
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the option trader, and there some instances where a change in dividend
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policy can have desirable, or undesirable, effects on the bottom line.
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Despite the fact that dividends do not technically involve greeks, they need
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to be monitored in much the same way as do delta, gamma, theta, vega, and
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rho. |