Stock Option Strategy?

Since a lot of stocks go up during the week before the ex-dividend date, would it be a good idea to buy call options and hold through that week, and then sell on the day before the ex-dividend date?

This way you can take advantage of the gains, and then prevent any loss, since the stock usually drops on the ex-dividend date.

4 Answers

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  • 8 years ago
    Favorite Answer

    To my knowledge there have been no studies made that prove that the majority of stocks rise in price before the ex-dividend date. Most dividend paying stocks do not fluctuate enough for the option to increase in value enough to make a profit, unless the company increases the dividend amount and that is usually known for weeks in advance. So, most stocks generally perform as the market as a whole and you would likely lose your bet and your option would fare no better than the 80% of all options that expire worthless on the expiration date.

  • 8 years ago

    Ah..... if it was only that easy........

    You need to read some basic books on stocks & options. Without a good grounded understanding of the basics.... you will hurt your portfolio.

  • 8 years ago

    Indeed, this is one strategy that is already widely employed by many professional options traders.

  • Raysor
    Lv 7
    8 years ago

    Go for it! Sounds like you have spotted an opportunity that no-one else has spotted.

    You shouldn't have told everyone here on Yahoo!Answers.

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