MSFT Special Dividend Correction
I answered erroneously concerning the treatment of QQQ options via the special dividend being paid by MSFT.
The NDX index will protect the option holders from the effect of the special dividend by adjusting the divisor of the index. The index should trade down the ex-dividend amount, but will not because of this adjustment.
The QQQ options are physically settled and treated subjectively, not objectively like the NDX. So the answer is a little muddled.
The QQQ is a trust and managed by a trustee. It is actually up to this trustee to determine whether or not the dividend is passed through to the trust holders.
We believe that the QQQ options as determined by the trustee will not be adjusted.
If the trustee decides not to pass the dividend through, the ETF will not change in price on the ex-date and option holders will not be affected.
If the trustee decides to pass the dividend through, because the options will not be adjusted, a holder of a call will suffer and the holder of the put will benefit.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter