Iron ore price, page-52361

Because there are endless combinations it is something that you should Google, but I will offer a very simple HYPOTHETICAL example.

Lets say a stock has a dividend announcement on the 15 August and pays a dividend on 3 September. Let's say the August option expiry date is 25 August and September options expiry date the 25 September.

In this example:
- The August options expire before the dividend is paid on 3 September, but after the profit result and dividend announcement.
- The September options expire after the dividend is paid.

Therefore the August options do not account for the ex-dividend drop, but the September options do.

Now let's say the market is expecting a 40c dividend payment, but you believe it will be $1. This means, if your view is correct, the September options need to incorporate an additional 60c drop if the $1 dividend is what eventuates.

A way to trade this is to use *European* options to:
- Implement a synthetic long for August (buy an at the money call, sell an at the money put).
- Implement a synthetic short for September (buy an at the money put, sell an at the money call).

* Note the options don't need to be at the money, but rather just the same strike and be all European (at least for September).

Prior to August option expiry you have a simultaneously long and short position .. therefore the stock going up or down makes no difference to you.... All that matters is the relative pricing between the August and September options.

If the dividend expectations increase, the September contracts will increase in value as the market prices in a bigger ex-dividend drop (purchased puts will increase in value, sold calls decrease in value), but the August options value won't change as these options expire before the dividend is paid.

So there is one non-directional approach for this HYPOTHETICAL example.

To do this for FMG you would have the use July / September options and then roll the July to weekly August options when they list due to the timing of FMG's full year results this year.