Why the dividend reduce the vaule of call
Share
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Call option jab tum loge, you have a right to buy a stock someday in future. Now, suppose company declares a dividend, people will only be able to get dividend if they actually have stock in their dmat acc. This is only possible of you buy stock. So the people who were bullish and were planning to buy call, would rather switch and opt for buying the stock directly so that they could enjoy the dividend. Hence, dividends reduce value of call.
Not able to understand can u plz elaborate
You will get dividend only when you have stock with you right? Now, if you buy call option, you are not buying stock but you are buying a right to buy stock in future. That means, if company announces dividend, you will not get the dividend since you dont have stock but you have option to buy stock in future. This is the reason why people will prefer to buy stock directly instead of buying call option since they will get dividend. Since they will prefer buying stock and not call, the value for call will fall.