They are having a special cash dividend of 5.23 with the record date Oct 9th and the payout date the 17th. This means that the ex div date was Oct 7th? However, the stock didn’t move five dollars and is currently trading around nine. Can someone explain what is going on or have any research information on the topic. Thank you!
CHICAGO, Oct. 9 /PRNewswire-FirstCall/ – Allscripts Healthcare Solutions, Inc. (“Allscripts”) (Nasdaq: MDRX - News), the leading provider of clinical software, connectivity and information solutions that physicians use to improve healthcare, announced that The Nasdaq OMX Group, Inc (“Nasdaq”) informed Allscripts today of a change in the anticipated date on which shares of its common stock will trade without the right to receive the previously announced special cash dividend contemplated by the merger agreement entered into by Allscripts on March 17, 2008. The date on which Allscripts common stock will trade without the right to the special cash dividend is now expected to be October 13, 2008. As previously announced, the record date for the special cash dividend contemplated by the merger agreement with Misys plc is October 9, 2008. Holders of Allscripts common stock who sell their shares through October 10, 2008 also will be selling their right to receive the special cash dividend.
so how come the stock didn’t drop $5.23 as the dividend was paid out. It seems to me you could have bought the stock, received the dividend, then sold the stock for a dollar or so less and made some big money.
the above says x-date 10/13.
so if I bought the stock on friday, do I receive the special stock dividend? Should I call investor relations? I ask because I bought Put options for $3 (12.5 puts) and hedged by buying stock on Friday. So if I do receive this dividend, it will be a big deal. Thanks
The put will be adjusted after the stock drops $5.23 on Oct 13, i.e., the strike price will be about $7 instead of $12.5, but you will get the dividend if you bought before Oct 7. This is what I think.
basically, your set up is neutral. You cannot make or lose money out of it, regardless of the dividend issue.
Dreary that certainly is not true. If the stock pays 5$ cash and I bought it before the ex-date then I receive $5, the stock price falls five dollars (but now my put is worth that much more). The puts price doesn’t adjust based on dividend issues.
It most certainly does adjust. Just always keep in mind there is no quick and obvious way to make money. The only way you could make money in your case is if the stock rises by an amount greater than what you paid for the put. Your upside is less than that of a straight stock purchase, but your downside is small and fixed. This is not a bad strategy for someone expecting a big upside but wants to cut losses very short.
Dreary-Do all puts adjust with a cash dividend or just this one because it is a special cash dividend?
Not all dividends, and I believe that the options exchanges adjust according to some criteria (I don’t know exactly how they decide). In fact historical prices of the stock will also adjust when there is a big dividend like this, meaning that, if you look at a historical chart of MDRX after the adjustment, you will see that earlier prices have been adjusted downward. This happened before with MSFT when it paid $3 per share.