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Derivatives

  Derivatives   |   Terms
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  • July 26, 2021
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Dividend Protection

Adjusting the strike price of an OTC option by the amount of dividends paid on the underlying asset/ stock. This means the strike price is decreased on the ex-date by an amount equal to the dividend. Broadly speaking, the adjustment process can be carried out in different ways: restating stock prices on a pre-dividend basis, accumulating dividends till payment at exercise of the options, and decreasing the stock option strike price when dividends are actually paid out.


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