Calendar & diagonal spreads
How do corporate dividend announcements alter the term structure pricing of long call calendars?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Anticipated dividend payments can raise the implied forward price adjustments embedded in call pricing, often making long-dated calls relatively cheaper (ex-dividend discount) and affecting the relative value of each leg in a call calendar.
How it works
Dividends also raise the risk of early assignment on short in-the-money calls near the ex-dividend date, which can disrupt the intended calendar structure if the short leg is exercised prematurely.
An example
Ahead of an ex-dividend date, a short in-the-money call in a calendar spread faces elevated early assignment risk, potentially forcing the trader to deliver shares unexpectedly.
Risk & limitations
Early assignment can occur before expiration despite theoretical models suggesting otherwise, and dividend-related calendar pricing shifts are not always fully predictable in advance.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.