Purpose – This paper aims to explore the potential use of a dividend capture strategy by individual investors. This strategy arises from the 2003 tax law changes which lowered tax rates on dividends received, while leaving the short-term tax rates on capital losses unchanged. In addition,...

Purpose – This paper aims to explore the potential use of a dividend capture strategy by individual investors. This strategy arises from the 2003 tax law changes which lowered tax rates on dividends received, while leaving the short‐term tax rates on capital losses unchanged. In addition,...

The Black-Scholes* option pricing model is commonly applied to value a wide range of option contracts. However, the model often inconsistently prices deep in-the-money and deep out-of-the-money options. Options professionals refer to this well-known phenomenon as a volatility 'skew' or 'smile'....