If I buy an at the money straddle, hoping to profit from a volatility increase, then how does an underlying dividend announcement affect my PnL?
I am thinking that if the underlying announces a dividend, then the call premium will drop(gradually between now and the ex div date) and the put premium will rise.
So will these two offset each other completely? What else should I be aware of?
I am referring to an ATM straddle position.