Using future dividends in option calcs

[village idiot]

quick question for you guys;

when you are looking at an option series where there is a dividend before expiry, where do you get the current best estimate of the dividend yet to be annnounced? The 'dividend schedule' in IAB seems bollocks and the ASX only have past or announced divs on their site.

The stock in question is WBC looking for the may dividend to price may options.
last divi was 65c so a starting guess would be around 70c. trying to match that up with the actual option price though isnt easy;

current WBC=2337
May 2350 C = 63.5 mid price and 2350 P = 110 mid price.

the only inputs (in the option calc) that match both those figures are a div=55c and V=22%

the 55c seems too low as i doubt WBC are looking to drop the div and the IV is a lot higher than April (which is around 15%). I know values of american options should be higher than the euro model but that much?

If I use div=70c then the V required to match the market prices is 23.8% for the call and 19.5% for the put. but that cant be because the no arbitrage assumption requires V to be same for put and call right?

signed
confused of perth

 

[village idiot]

Re: using future dividends in option calcs

to confuse matters more, if we look at the May 2300; Put=82.5mid and Call=92mid, the only figs that work here are div=45c, v=22.5%

there cant be a different div input for different strikes, and there cant be wildly different IVs for put/call at same strike, so what gives?

 

[skyQuake]

quick question for you guys;

when you are looking at an option series where there is a dividend before expiry, where do you get the current best estimate of the dividend yet to be annnounced? The 'dividend schedule' in IAB seems bollocks and the ASX only have past or announced divs on their site.

The stock in question is WBC looking for the may dividend to price may options.
last divi was 65c so a starting guess would be around 70c. trying to match that up with the actual option price though isnt easy;

current WBC=2337
May 2350 C = 63.5 mid price and 2350 P = 110 mid price.

the only inputs (in the option calc) that match both those figures are a div=55c and V=22%

the 55c seems too low as i doubt WBC are looking to drop the div and the IV is a lot higher than April (which is around 15%). I know values of american options should be higher than the euro model but that much?

If I use div=70c then the V required to match the market prices is 23.8% for the call and 19.5% for the put. but that cant be because the no arbitrage assumption requires V to be same for put and call right?

signed
confused of perth

Interim divvie, expected to be around 60c i think.

And yes - american does make a large enough difference

 

[cutz]

when you are looking at an option series where there is a dividend before expiry, where do you get the current best estimate of the dividend yet to be annnounced?

Webiress "Option Valuation" for WBC shows a div date of the 17-5-11 with an amount of 65cents,
not sure where the info comes from.

 

[village idiot]

thanks cutz and skyquake for your replies