Options and Dividends

Most investors understand the concept of stock dividends.  A stock dividend is a dividend payment made in the form of additional shares rather than a cash payout. Companies may decide to distribute this type of dividend to shareholders of record if the company’s availability of liquid cash is in short supply.  A cash dividend is a payment made by a company out of its earnings to investors in the form of cash. This transfers economic value from the company to the shareholders instead of the company using the money for operations.  But, many options traders do not understand how dividends and options are related.  Today we have a great example of how these asset classes work together.  Click the video above to find out how.