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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.

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