(The effect of dividend on exercising strategy of call options) Cash dividends affect option prices through their effect on the underlying stock price. Because the stock price is expected to drop by the amount of the dividend on the ex-dividend date, high cash dividends imply lower call premiums. Suppose you own a call option with a strike price of 90 that expires in one week. The stock is currently trading at $100 and is expected to pay a $2.00 dividend tomorrow. The call option has a value of $10. What are you going to do: hold the option or exercise the option early