The options market provides perhaps the best window into the future for the broader stock market and right now it’s painting a bleak picture for Citigroup investors.
Options futures are predicting that Citi’s dividend could be reduced dramatically, Jon Najarian said on Thursday’s Closing Bell, possibly even down to 25 cents in a bid to preserve capital.
Options have several input variables that determine their price: the time until expiration, interest rates, the striking price and the dividend. If one of those variables changes, the price will change as a result, Najarian said. With Citi, every variable but the dividend is known – so the price is in question so long as people are betting that the dividend will drop.
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