It may be too soon to call this a victory, but for the moment, I’ll take whatever I can.
In this case, the victory was waking up this morning an still having Monday’s share purchase of Whole Foods in the account.
Whole Foods was ex-dividend today for $0.14
But shares closed yesterday at $30.73, which meant that the $30.50 strikes could have been assigned early.
But it’s all about the math and the probability of what could still happen over the course of the days remaining on the option contract.
In this case, following the $30.73 close and then deducting that $0.14 dividend, Whole Food shares would then start being available to trade at $30.59
For the option holder, the question was would it be worth actually paying the $30.50 for shares in order to grab the $0.14 dividend or hoping that maybe there was still some juice in that option contract.
Of course, if the option holder decided to grab the dividend, not only would he have to pay the $30.50 for shares, but he would also take the risk of shares declining in value at the open.
In that case, while the premium paid for the contracts would be offset by the $0.14 dividend, there’s still the matter of the potential loss from holding shares or the potential to tie up funds that could be put to levereged use by an option buyer.
So, I am celebrating holding onto the dividend, but that celebration could be dashed if the shares continue their decline from this morning.
From the perspective of the option buyer, unless those shares turn around by Friday, this will end up being a lose – lose.
But that’s their problem.
I’m content to deal with my small victories of receiving the premium and the dividend and still having a couple of days to either see the contract get assigned or rolled over.
Although, there is still that other possibility, but I don’t really need to think about that right now.