How does a dividend increase the price of a put and decrease the price of a call?
what happens when a stock (the underlying) goes ex dividend? price goes down by the amount of the dividend. so if you had a put, does that help or hurt you? helps. if you have a call, would that help or hurt you? hurt.
Call= S-X. If you have cash flow (eg- dividends), then this will reduce the stock price. So, Call value decreases. Put=X-S. Here, S decr. again because of the dividends. Consequently, X-S increases. So, the put value increases.
I get the call. It goes down b/c you don’t have access to the dividend hence you subtract it out. Not getting the put as much.
Put=X-(S- Present value of Dividends). S will decrease. So, X- S will increase==> Put goes up