Dividend

Company earnings paid to shareholders

What is Dividend?

Dividend A distribution of a company's earnings to shareholders. Dividends affect options pricing because call values decrease and put values increase as the ex-dividend date approaches. Early assignment risk increases for in-the-money calls before ex-dividend dates.

Complete Definition

A distribution of a company's earnings to shareholders. Dividends affect options pricing because call values decrease and put values increase as the ex-dividend date approaches. Early assignment risk increases for in-the-money calls before ex-dividend dates.

Example

AAPL pays a $0.25 quarterly dividend. If you're short an ITM call before ex-div, you may face early assignment as the holder exercises to capture the dividend.