The "daily Call" From Option Alpha: Options Trading | Stock Options | Stock Trading | Trading Online

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, we're going to answer the question, “Do I receive dividends when selling call options?” There’s two parts to this that I think we really have to dissect in order to understand if we are able to receive dividends when selling call options. The first thing is just to understand that when we are selling a call option, we have the obligation to sell stock at that strike price in the future to the call option buyer. We have to sell stock to them at that strike price which means that if they were to exercise that contract, as the short option contract seller, we would be in a position where we are actually short shares of the underlying security versus long shares of the underlying security. And so, therefore, if we are short underlying stock, we would, of course, not get paid the dividend. In fact, we might actually have to pay out the dividend to a potential call option buyer if they were to exercise that contract.