I am at a loss for what to do about this situation that I "thought" I understood before the Ex-Date happened.

I was capitalizing on the 2.25 dividend that SSSS announced. I bought over 200 shares before the Ex-date. I knew the stock price would drop the 2.25 on the Ex-Date. But it had gone up significantly more than that since announcement, so I figured I'd by puts to catch some gains on the fall... and to somewhat protect the shares I have when I let them go.

200+ Shares basis - \$15ish
Several - \$15 puts (20 aug)
1 - 17.5 put (17 sep)
I did not select or vote for anything in any communication

On the Ex-Date, my puts are now adjusted. The stock price is dropping (as I expected)... but the value of the puts are rather puny. Half of this was an experiment, I wanted to see how this all worked out.... but the other half, I intended to exercise the puts, releasing the shares... But I cannot determine at what price the shares are going to be sold??? If I keep two of the \$15 puts and exercise them, are they still even \$15 puts?? (or are they maybe \$12.75 puts now?????)

I cannot find a way to tell that value, if they are in the money, or what the result of exercising will be... I just see 17.5 Adj and 15 Adj... (which are both slightly in the negative)

I believe I can discern what selling the contracts would yield, from the option chain.. But I am assuming people avoid looking a those, so I'd expect pretty low pricing there.

Please tell me there is some quick math that I haven't stumbled on yet, that is used to figure this out.

Most profitable execution? (not in a "financial advice" context, but more of a 'path of least damage' context...... don't know if that's a rule here) My question is trying to determine what I am actually holding at the moment and where I can go wrong.

• So 15 and 17.25 are the strike prices? What is the current price of the underlying? Commented Aug 19, 2021 at 4:28
• @Acccumulation that would be about 13 dollars now Commented Aug 19, 2021 at 5:57

In one of your comments you wrote that the shares cost \$1500 and the \$17.50 puts which was \$1.50 ITM cost \$200. That doesn't add up because with the stock at \$15, that's \$2.50 ITM. So let's create an accurate hypothetical:

Suppose you bought a 100 shares for \$16 (-\$1,600) and you bought the \$17.50 put for \$2.00 (-\$200) which is \$1.50 ITM. Your total cost is \$-1,800 and you have the right to sell the shares for \$17.50 which would result in a loss of the 50 cents of time premium paid.

To keep it simple, now suppose there's an all cash special dividend of \$2.25. Your receive it and it lowers your cost basis to -\$1,575 (-18.00 + 2.25). If you exercise your adjusted put, you must deliver 100 shares plus the adjusted amount of \$2.25 and in return you receive \$17.50 (-\$1,575 - 2.25 + 17.50) which is the same 50 cent loss as above.

Effectively, all that's happening is that with the common, they're giving you \$2.25 and they're taking \$2.25 away when the adjust the put. It's a wash. The dividend does not affect your overall P&L.

• I think I understand what youre saying about the numbers not adding up. I didn't anticipate you doing precise math. I was actually 1.21 ITM. The shares were bought @15.34. I did not buy all of these things simultaneously. The underlying was about \$16 (or no lower than 15.80) when I bought the 17.5 on 8/12. I think I understand the dividend portion you explained. So what you're saying is (if exercising)the div is not mine because I bought the put before the ex-div? and maybe overpaid for the put? It just seems like I should be netting more than \$16 if my basis was 1.21 ITM??? Commented Aug 21, 2021 at 2:27
• ...then again, now getting a little clearer. I guess this is the difference between buying puts for gains vs buying puts for protection. If I had to buy shares to exercise today, they'd be 12 or so dollars, lowering my basis and increasing my profit. The protection, just prevents you from losing money. @JTP-ApologisetoMonica I will take this answer, as the additional information helped me get a clearer picture (though your answer was first and accurate). I hope that does not offend. Thank you both for your attention in this. BTW i liquidated the all of the puts for a slight profit, out of fear Commented Aug 21, 2021 at 19:24

(If) I am long the \$15 call, for the same \$15, I now get 100 shares plus \$225 cash. That’s how the options seem to be adjusted. You bought puts. You would deliver 100 shares plus \$225 at whatever strike you bought.

• can't say it makes a lot of sense, but the \$225 is probably what I have been missing. Regardless of which put I exercise, the \$15 or the 17.5, it seems like it would only be costing me. I could understand that in the case of the 15, at the start of the Ex-date, that put was not in the money... but the 17.5 (was \$1.5 ITM) felt like I should earn more??? If I paid \$1500 for the 100 shares and I am letting them go + \$225 that's \$1725 debit, and then consider the 17.5 put cost \$2(\$200) that's -1925. Then I am receiving a credit of \$1750 exercise proceeds. So exercising an ITM put costs me \$175??? Commented Aug 20, 2021 at 2:31
• I think you got it right. Your broker, even a discount broker, should be able to spell out your requirement to exercise this put. In general, the thing to be aware of is that normal, tiny dividends don't have this impact. Options are only adjusted in response to an unusually high single time dividend. Commented Aug 20, 2021 at 9:56
• @WU-TANG - So exercising an ITM put costs me \$175??? No, for two reasons. You did not take into account that you are receiving the dividend. Also, your set up doesn't make sense. Your ITM amount was off by \$1.00. Commented Aug 20, 2021 at 19:17
• Thx Bob. There was a lot going here. Commented Aug 20, 2021 at 19:18
• @ JTP - Your broker, even a discount broker, should be able to spell out your requirement to exercise this put. High expectations indeed :->) Commented Aug 20, 2021 at 19:18

You can close a put by either exercising the option to sell your shares or by selling the put itself.

If you have several puts but do not have "several hundred" shares, then at least some of the puts will have to be sold to close your position. (Each put exercises 100 shares).