Exercise before the ex-date
Definition · Level 11 · Pricing toolkit
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Using an American call the day before the ex-dividend date to collect the dividend. It pays when the dividend is bigger than the call’s remaining time value; the stock drops by about the dividend on the ex-date.
Example
Deep in-the-money call with 0.05 of time value and a 0.60 dividend due tomorrow → exercise.
Where Tradecraft teaches it
Level 11 · Pricing toolkit, in the lesson “No-arbitrage bounds & early exercise”: Prices an option can never break, the limit cases, and when an American option is worth exercising early.
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