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Special dividends and option adjustments

When a company pays a one-time special dividend, the OCC usually lowers the strike of its options by the dividend amount. Regular dividends and very small special ones are not adjusted. Here's how to tell which case you're in.

Options guide · 7-minute read · Updated 2026-10-28

The short answer

A special dividend is a one-time cash payout, outside the company's normal schedule. When one is big enough, the OCC (the Options Clearing Corporation, the group behind every listed US option) usually lowers each strike by the dividend amount. The contract still delivers 100 shares.

A regular dividend is the normal, scheduled kind. The OCC generally does not adjust for those. The market already prices them in.

So there are two questions. Is the dividend special? And is it big enough to adjust? The OCC decides, and it says so in an information memo for the stock.

Why the OCC adjusts at all

On the Ex-dividend date, a stock usually drops by about the dividend. A $5 dividend takes about $5 off the share price. The cash leaves the company and goes to shareholders.

Option holders don't get the dividend. So without an adjustment, a big one-time payout would quietly move value from one side of every option to the other. The OCC adjusts so the event itself doesn't make either side richer or poorer.

The worked example (an illustration, not a trade idea)

Here's a made-up case. XYZ trades at $60. It announces a one-time $5 special dividend. That's $500 for every 100 shares.

Picture two options on it:

• a call with a $55 strike (in the money by $5);
• a put with a $60 strike (right at the money).

On the ex-date, XYZ opens at about $55. Here's what happens to each option, without and with the adjustment:

Without the adjustment, the put seller would lose $500 overnight from a payout they never received. With it, the trade looks the same after the ex-date as it did before. That's the whole point.

When the strike is NOT adjusted

Three common cases stay unadjusted:

1. Regular dividends. The quarterly kind. The market expects them, so they're already built into option prices.
2. Very small special dividends. The OCC's rules set a minimum size. Below it, the strike stays put. The exact threshold is in the OCC's By-Laws, and the memo for your stock says which way it went.
3. Cases the OCC treats differently. It looks at each special dividend one by one. Don't assume; read the memo.

When there's no adjustment, the dividend works like a normal one. The stock drops on the ex-date, and nothing about the option changes to make up for it.

What this means for a covered call or a short put

If you run the wheel strategy, here's what to watch.

Covered call, adjusted. You own 100 shares and sold a call. If you still hold the shares on the ex-date, you get the special dividend. The call's strike drops by the same amount. Call holders have much less reason to Exercise early to grab the dividend, because the adjustment already accounts for it.

Covered call, not adjusted. This is the risky one. If your call is in the money, the buyer may exercise the day before the ex-date to collect the dividend themselves. That's Early assignment. Your shares are called away, and you miss the payout. Say it's a regular $0.80 dividend and you're assigned early: you lose the $80 you were counting on, and the shares are gone. My guide on early assignment before a dividend shows how to spot it coming. For a walk-through when it's a special dividend, see a special dividend hit my covered call.

Short put, adjusted. Your strike drops with the stock. Your risk is about where it was.

Short put, not adjusted. The stock drops by the dividend, and your put moves closer to, or deeper into, the money. Put sellers don't receive dividends, so that drop is a loss with nothing to offset it.

How to check your contract

1. Read the company's announcement. Does it call the payout "special", "one-time" or "extra"? Note the amount and the ex-date.
2. Find the OCC memo. The OCC website has an information memo search. Type in the ticker. The memo says whether strikes are lowered, by how much, and from what date.
3. Look at your broker's contract details. An adjusted contract shows the new strike. Its symbol may change too, sometimes with a number added, as in why an option symbol ends in a 1.
4. If it's not adjusted and your call is in the money, decide before the day before the ex-date: buy the call back, roll it, or accept that you may be assigned.

My guide on how to read an OCC memo walks through a memo line by line. For splits, mergers and spin-offs side by side, see corporate actions and your options.

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