Skip to main content

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.

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?
Under What Specific Conditions Is It Rational to Exercise an American Call Option Early?
How Does the Dividend-like Yield of a Staked Cryptocurrency Affect the American Option Exercise Decision?