Dear John sir,
Sir suppose call options are given to management on the company's shares, which they could exercise in 1 yr's time. The share is currently trading ex-div, and we are also given the dividend in 1yr's time. So what do we do to find 'Pa' in B&S formula? do we deduct the divined in 1yr's time?
And what if the share is trading cum-div? We deduct this year's dividend and next year's too?
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Call options
5y ago#1Yes - you do subtract the dividend in 1 years time (and this years dividend if the shares are trading cum div).
From memory this has only been relevant once in the exam and it was many years ago :-)
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