I lose... CBOE changes the rules :(
Yikes... If any of you follow ACAS at all you may know that since last fall they have had to declare a dividend of about $1.07/share by this June 15th. They declared it last week, and the stock has soared.
The dividend is enormous compared to the share price, but it is being paid as 90% stock/10% cash, which is a small net loss to shareholders due to the tax burden...
But the fact that the dividend had to be paid set up a nice trade. The trade works like this:
1. buy a share of ACAS
2. sell an in-the-money ocvered call (in my case November and January $2.50's) to hedge against the downside, with the stock at ~2.70 those were paying ~1.10. So you put $1.60 into the share, you get 11 cents cash from the divi and 96 cents worth of stock. The break even price for ACAS shares is a little over a buck and you're double your money if the stock is at $2.20 or so...
So thats a pretty decent trade in my book..
Except the short options now have to deliver the dividend along with the shares, which means, I think, that I lose. I didn't know they could do that. Also, I'd LOVE to hedge my ACAS shares right now because its fairly well destined to drop like a stone ex-divi when short interest returns...