What if options markets could signal dividend cuts before companies announce them?
New research from OptionMetrics shows that stocks with the most negative options-implied dividend signals are significantly more likely to cut payouts than the broader market.
“Typically 90 to 120 days out, we’ll start seeing it. In some cases, it can be out to a year when the market really knows the long-term dividend is not sustainable.” — Garrett DeSimone, Head of Quantitative Research at OptionMetrics.
By extracting dividend expectations embedded in options prices, traders may gain an earlier view of potential corporate actions and dividend risk.