What is a capture dividend strategy?
Occasionally, a decision to purchase a stock is based on timing the purchase to coincide with the ex-dividend date, that is the last date at which the purchaser is entitled to the dividend. When the ex-dividend date arrives, the value of the underlying stock is typically reduced by the amount of the dividend. The underlying option, particularly when it is just a few days away from its expiration, will also be reduced in value, thereby offering a lower premium. In the best of all worlds, the dividend capture strategey seeks to not only get a high options premium, but to also allow the buyer of the underlying stock to get the dividend, as well. If your stock is “in the money”, that is, its value is greater than the strike price, you do stand a greater chance of the options holder exercising their right to purchase your shares at the strike price, specifically so that they can get the dividend.
