As with trading any financial product, there are many strategies to choose from. One strategy isn't necessarily better than another and many times the strategy that works best for you simply depends on your trading style.
Today's guest blog post is from Elizabeth Harrow of Schaeffer's Research and she is sharing 2 different options strategies that revolve around playing dividends. Enjoy the post below and leave a comment on the blog. If you like this article and wish to receive 6 months free Option recommendations, please click HERE.
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As you may or may not be aware, dividends are one of the many factors that influence an option's price. Because dividends don't have as big an impact as other variables, such as time decay and implied volatility, they're generally not a topic that I dedicate a lot of time and analysis to. However, every option trader worth his or her respective salt should know that dividends create trading opportunities (even if only so that he or she can break out this tidbit at particularly boring cocktail parties). So, in today's column, we're going to take a look at two common ways to trade around dividends.
Dividend arbitrage
First up is dividend arbitrage, which uses a combination of stock and in-the-money puts to capitalize on dividend-related price changes. Continue reading "Options: Two Ways to Play Dividends"
