Dividend risk
Definition · Level 3 · Spreads & short options
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Chance that a short ITM call is exercised on the last business day before the ex-date, leaving you short stock that owes the payout. Highest when the dividend exceeds the call’s remaining extrinsic value.
Example
0.60 dividend vs 0.05 of time value → assignment tonight is likely.
Rules and market figures change: check the current ones before relying on this.
Where Tradecraft teaches it
Level 3 · Spreads & short options, in the lesson “Assignment, pin and expiration risk”: Early assignment on short legs, dividend risk, exercise by exception, pin risk and the one-leg-ITM trap.
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