Why would an increase in the dividend yield decrease the valuation in the stock options?

CFA Level II
#1

FSA: Employee Compensation Why would an increase in the dividend yield decrease the valuation in the stock options?

#2

Because that’s one of the inputs in the BSM - it’s the same concept as why paying out dividends decreases the value of a call option on said stock and increases the put option on said stock.

#3

Dividends only benefit those who hold the actual underlying. Buy buying an option, you are forgoing the opportunity to receive that dividend.

#4

thanks for responding, you cleared it up for me