Hi Gyro, to calculate FAIR VALUE you need an Option Pricing Model otherwise you will confuse yourself.
Better to learn the correct way first and Temby's book I recommended above has a workable OPM for Excel spreadsheet.
The current antics of SGA regarding CBAWGN are extraordinary and CBAWGN trading near to INTRINSIC VALUE only.
This may seem like an arbitrage opportunity but is not so and will contra when CBA goes ex-div some weeks prior to Expiry (CBAWGN is a European type remember...)
Implied Volatility is a required Input for an OPM to calculate FAIR VALUE.
The issue concerning the discrete dividend/derivatives issue relates to how OPM's price FAIR VALUE from now (45 day mark) to ex-div date. As my post above OPM's for CBAWGN had IMPLIED VOLATILITY at 7.5% and from yesterday are using 21.55%. (Underlying-Dividend)
