Will the dividend announcement impact the pricing of Weyerhaeuser's options and futures contracts?

Created August 08, 2025 at 08:26 PM

Short answer: Yes. The announcement of a $0.21‑per‑share cash dividend will be reflected in the pricing of both Weyerhaeuser (NYSE: WY) equity options and its futures contracts. The effect is modest (the dividend represents only a few‑tenths of a percent of the current share price), but market participants will adjust option‑pricing models and futures forward prices to incorporate the expected cash outflow on the ex‑dividend date.

1. How a cash dividend moves the underlying equity price

Event	Typical market reaction
Ex‑dividend date (the first day the stock trades without the dividend)	The stock price drops by roughly the dividend amount (≈ $0.21) because new buyers are no longer entitled to the cash payment.
Record date (holders of record as of this date receive the dividend)	No price impact; it is a bookkeeping date.
Payment date (Sept 12, 2025)	The cash actually changes hands but the price adjustment has already occurred on the ex‑date.

Because the dividend amount is known in advance, the market “prices in’’ the expected drop ahead of the ex‑date. The forward‑looking price of the stock (the forward price used in derivatives pricing) will therefore be lower by the present value of the dividend.

2. Impact on Weyerhaeuser futures contracts

Futures on WY are priced using the cost‑of‑carry relationship:

[
F{t,T}= (St - PV_{\;t}(\text{Dividends between } t \text{ and } T)) \times e^{r(T-t)}
]

(S_t) – spot price of WY at time t
(PV_{\;t}(\text{Dividends})) – present value (discounted at the risk‑free rate) of any cash dividends that will be paid before the futures expiry T
(r) – risk‑free rate

Because the $0.21 dividend will be paid on Sept 12 (and the ex‑date will be a few days earlier, typically 2 business days before the record date), any WY futures that expire on or after the ex‑date must be priced lower by the discounted dividend amount. In practice:

Near‑term futures (e.g., September contract) – will trade roughly $0.21 (or the PV of $0.21) below the “no‑dividend” forward price.
Long‑dated futures – will also incorporate the dividend, but the impact on price is even smaller because the PV of $0.21 is discounted over a longer horizon.

Consequently, traders will see a slight downward adjustment in the futures curve once the dividend is announced, and the adjustment will be most visible in contracts whose settlement date is close to the ex‑dividend date.

3. Impact on Weyerhaeuser equity options

3.1. General pricing framework

For European‑style options, the Black‑Scholes‑Merton (BSM) formula with a known cash dividend modifies the underlying price as:

[
S^{*}=St - PV{\;t}(\text{Dividend})
]

The dividend is subtracted from the spot before applying the log‑normal dynamics. For American‑style options, the same dividend amount is used, but there is an early‑exercise premium to consider for calls.

3.2. Direction of the effect

Option type	Expected price change (all else equal)
Calls (especially deep‑in‑the‑money or with expiration after the ex‑date)	Decrease – the forward price of the stock is lower, reducing the intrinsic value and time value.
Puts (same expiry scenario)	Increase – a lower forward stock price makes the put more valuable.
Very short‑dated options that expire before the ex‑date	Little or no impact – the dividend will not be paid before expiration, so the pricing model treats the dividend as zero for those contracts.
American calls that are ITM and expire after the ex‑date	May experience early‑exercise pressure: holders might exercise just before the ex‑date to capture the dividend, especially if the dividend amount exceeds the time value lost by exercising early.

3.3. Quantitative magnitude (illustrative)

Assume current spot = $70.00 (typical range for WY in 2025).

Dividend yield = $0.21 / $70 ≈ 0.30 %.
Present value (discounted at a 5 % risk‑free rate for 30 days) ≈ $0.209 (virtually the same as the cash amount).

For a one‑month ATM call (strike ≈ $70) with 30‑day maturity:

Without dividend, BSM might give a premium of $2.10.
Subtracting the PV of the dividend reduces the forward price, lowering the call premium by roughly $0.15–$0.20 (≈ 7‑10 % of the premium).

The exact figure depends on volatility, interest rates, and the remaining time to expiry, but the adjustment is on the order of a few‑tenths of a dollar per contract.

3.4. Greeks that are affected

Greek	How it changes because of the dividend
Delta	Slightly lower for calls (stock moves less on a $1 move because part of the price is “pre‑paid” by the dividend).
Theta	May increase for calls (the dividend accelerates the decay of time value).
Gamma	Largely unchanged; the curvature is driven by volatility.
Vega	Unchanged (dividend is a deterministic cash flow, not volatility).
Rho	Slightly affected because the dividend changes the effective cost‑of‑carry.

4. Practical considerations for traders

Verify the ex‑dividend date – The announcement does not list it, but NYSE rules make the ex‑date typically two business days before the record date. Knowing the exact date tells you which option expirations will be impacted.
Early‑exercise monitoring – For American‑style calls that are deep‑ITM and expire after the ex‑date, watch for possible early exercise on the ex‑date (or the day before).
Futures curve adjustments – Expect a modest downward shift in the September WY futures price once the market fully incorporates the $0.21 dividend. Longer‑dated contracts will reflect the same cash flow but the impact on price will be smaller after discounting.
Implied‑volatility surface – The dividend announcement itself is not a surprise; thus implied volatility should not spike. However, if the market’s expectation of future dividend policy changes (e.g., hints of higher payouts), the IV surface could adjust. Current news only confirms a routine quarterly payout, so IV is likely to stay flat.
Hedging strategies – When using options to hedge a WY equity position over the ex‑date, remember that the hedge’s delta will change slightly after the dividend payment. Adjust the hedge size by the dividend‑adjusted delta if you need a precise risk-neutral position.

5. Bottom line

Yes, the dividend announcement will affect pricing of WY options and futures.
The effect will be a small downward adjustment in the forward price of the underlying (≈ $0.21), which translates into lower call premiums and higher put premiums for contracts that remain alive after the ex‑dividend date.
Futures contracts that settle on or after the ex‑date will trade lower by roughly the present value of the $0.21 dividend.
Options expiring before the ex‑date are essentially unaffected, while American calls may be exercised early to capture the dividend.

Traders should incorporate the cash dividend into their pricing models (subtracting its PV from the spot) and monitor the ex‑dividend timeline to manage early‑exercise risk and adjust futures positions accordingly.