Bernadette Pieterse
Active Member
Hello,
For part (ii) in the question, why do we take dividends into account? Do the dividends affect the share price?
I would think that for a call option, the payoff for holder of the call would not be influenced by dividends because these occur before maturity and only the writer will benefit from dividends because they actually hold the share before maturity and the buyer of the call only gets the share at maturity? Am I missing a key concept?
Many thanks!
For part (ii) in the question, why do we take dividends into account? Do the dividends affect the share price?
I would think that for a call option, the payoff for holder of the call would not be influenced by dividends because these occur before maturity and only the writer will benefit from dividends because they actually hold the share before maturity and the buyer of the call only gets the share at maturity? Am I missing a key concept?
Many thanks!