Q. Where can I find a list of stocks that have weekly options?
A. Check here for the list: http://www.cboe.com/micro/weeklys/availableweeklys.aspx or visit CBOE Web site to learn more: (www.cboe.com -> Products -> Weeklys -> Available Weeklys)
Q. The Weekly Windfall Quick Start Guide refers to “Ideal Setup” and “Sunrise/Demise”. What are the definitions for these two conditions?
A. These are setups Preston has traded for quite awhile. An “Ideal Setup” is a stock breaking out of a resistance level/channel with some volume behind it.
The “Sunrise/demise” setup is a stock that has made a large gap down, into a 52 week low, and is starting to recover back to the upside. (These aren’t as common as Ideal Setups).
Q. What happens with options when a special dividend is paid on a stock? Or if no payment is made why would anyone own options after a dividend is announced because the value would drop as soon as it goes ex div? Same with regular dividends. It seems I’ve been burned a few times on this and wouldn’t want to miss if AAPL does do a special div.
A. When a special dividend is paid on a stock the broker will issue a non-standard option on exdividend. The non-standard option will either have the strike adjusted or they will adjust delivery if you execute the option. The non-standard options are only available for one day. The following day the new standard options will be available. Most brokers have a way for you to select non-standard options. They adjust the strikes to maintain the intrinsic value of the option. For example, if MSFT was trading at $35 per share and you owned the $30 call it would have $5 intrinsic value. Say MSFT issues a special dividend of $3. On ex-date the stock price will be adjusted for the dividend and will then be trading at $32. However, your same $30 call would then only have $2 intrinsic value. In order to keep you from unfairly losing $3 in intrinsic value the call strike would be reduced by the $3 special dividend to $27 so you would still have $5 in intrinsic value.
Q. In a past seminar, Preston talked about a book that lists companies that have consistently paid dividends over the years. Could you tell me the name of this book?
A. “Mergent’s Dividend Achievers” Our goal is to cover ground that will benefit the entire community…so get busy sending in those questions…