Does the Dividend of the Underlying Asset Affect a Covered Call Strategy? ⎊ Path

Does the Dividend of the Underlying Asset Affect a Covered Call Strategy?

Yes, the dividend of the underlying asset is a significant factor. If a covered call is deep in-the-money and the ex-dividend date is approaching, the option buyer may exercise early to capture the dividend.

This is known as "dividend capture" and can lead to the covered call writer being assigned and losing their stock before the ex-dividend date.

Can Assignment Happen before the Option’s Expiration Date?

What Is the Difference between American-Style and European-Style Assignment?

Under What Condition Would a Put Option Buyer Choose to Exercise Early?

In What Scenario Would Early Exercise of an American Crypto Call Option Be Beneficial?

Under What Circumstances Would It Be Optimal to Exercise an American Option Early?

Explain the Concept of “Assignment” in the Context of a Covered Call

Why Is Early Assignment More Likely for American-Style Options That Are Deep In-the-Money?

What Is the Risk of Early Assignment on the Purchased Put Option?

Glossar

Covered Call Writer

Role ⎊ The Covered Call Writer assumes the role of an option seller who holds a long position in the underlying crypto asset equal to the quantity specified in the call option contract they sell.

Covered Call

Strategy ⎊ This involves selling a call option on an asset that the investor already owns, thereby generating immediate income against potential appreciation.