15 lines
1.1 KiB
Plaintext
15 lines
1.1 KiB
Plaintext
At the same stock price of $76 per share, the call is worth $0.13 more
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after the dividend is taken out of the valuation. Barring any changes in
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implied volatility (IV) or the interest rate, the market prices of the options
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should reflect this change. A trader using an ex-date in the model that is
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farther in the future than the actual ex-date will still have the dividend as
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part of the generated theoretical value. With the ex-date just one day later,
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the call would be worth 2.27. The difference in option value is due to the
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effect of theta—in this case, $0.03.
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With a bad date, the value of 2.27 would likely be significantly below
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market price, causing the market value of the option to look more expensive
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than it actually is. If the trader did not know the date was wrong, he would
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need to raise IV to make the theoretical value match the market. This option
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has a vega of 0.08, which translates into a difference of about two IV points
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for the theoretical values 2.43 and 2.27. The trader would perceive the call
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to be trading at an IV two points higher than the market indicates. |