Question

A customer owns 100 shares of ABC stock and owns 1 ABC Put option. The customer wishes to sell the stock by exercising the put, but wishes to retain a recently declared cash dividend. In order to receive the dividend, the customer must exercise the put:

A. on the ex date
B. on the record date
C. before the ex date
D. before the record date

Answer 1

Answer: B- on the record date

Explanation: As stated in the question above, using the Put option to sell the stock on the record date will give the seller of the stock the right to receive any dividend declared by the company.

The put option is a financial agreement between the seller and buyer of a financial instrument at an agreed date and price.

For the seller of the instrument to able able to have access to any dividend declared on the instrument for the year, he/she must sell the instrument on the record date.