Dividends are very helpful when trading options. If you use them in a position that combines stocks and options, you can increase your income and/or reduce your cost basis. Even if you are not profiting from the dividend, it is helpful to know as it adjusts the stock price and can affect your position's profit.
In Samurai, we have dividend data that you can use:
- Dividend yield - The yearly dividend yield of the company. It is calculated by dividing the annual dividend by the current stock price.
- Payout Ratio - It is calculated by dividing the annual dividend by the current Earnings Per Share (EPS). It is a percentage that allows us to understand how much of the company's profits are distributed as dividends. We can use this to see if the dividend distributions are feasible long term.
- Dividend date - This is the Ex-date of the dividend distribution. It is the date where the stock price will be adjusted. Since options are temporary, this date is essential when trading options - especially around expirations.
- The dividend yield on strike - This is part of our unique feature 'Value on Strike' that we suggest you read about as it is very helpful for trading options. It is the dividend yield if the stock will be assigned at that strike. It can be used when you consider how cheap/expensive the stock is at that strike or if you are willing to buy/sell it at that price (be assigned).
If you search for 'dividend' in the 'add filter' window, you can easily see all the filters you can use.
When we have a dividend Ex-date in the database, we give a '$' indicator next to the symbol name. The color scheme:
- Grey - The Ex-date is after expiration.
- Green - The Ex-date is before expiration and beneficial to the strategy.
- Red - The Ex-date is before expiration and NOT beneficial to the strategy.
We have several predefined scans that can get you started with dividends. You can adjust them to fit your style better. Just click the 'dividend' tag to get started.