A comparison of several CSP vs CC

Since three Dividend Champions (KO, MO, and MRK) are going ex-dividend next week, I thought they'd be good candidates for comparing CSPs vs CCs. I also added MMM as a comparison. I took the first four ITM and OTM strike prices for each stock and subtracted the extrinsic value of the call (CE) from the extrinsic value of the put (PE). In theory, without a dividend event involved, the difference should be nil. The results:

Ticker:	MRK			MO			KO			MMM
Expiry/Ex-Div:	09/15	09/14		09/15	09/14		09/15	09/14		09/15	08/23
Price/Div:	$63.87	$0.47		$63.05	$0.66		$46.19	$0.37		$203.52	$1.18
	Strike	PE-CE		Strike	PE-CE		Strike	PE-CE		Strike	PE-CE
	$62.00	$0.14		$61.50	--		$44.50	$0.18		$195.00	--
	$62.50	$0.18		$62.00	$0.14		$45.00	$0.07		$197.50	$0.07
	$63.00	$0.26		$62.50	$0.19		$45.50	$0.10		$200.00	$0.04
	$63.50	$0.34		$63.00	$0.31		$46.00	$0.21		$202.50	$0.01
	$64.00	$0.40		$63.50	$0.36		$46.50	$0.32		$205.00	-$0.06
	$64.50	$0.44		$64.00	$0.45		$47.00	$0.32		$207.50	-$0.06
	$65.00	$0.46		$64.50	$0.13		$47.50	--		$210.00	-$0.02
	$65.50	--		$65.00	$0.52		$48.00	--		$212.50	--

MMM is about what I would expect -- near zero values -- although I do find it curious that all of the strike prices under the current stock price are positive, while those above are all negative. Sheer coincidence? As a check, I looked at IBM, MCD, and LLY. None showed the same pattern. If anything, I saw a different pattern. IBM was all negative, while the stock is on a decline. MCD was all positive, while the stock is rising. LLY was a random mix. MMM is on the rise today.

In general, for the three stocks going ex-dividend next week, the difference between the PE and CE seems to increase towards the amount of the dividend as the strike price goes up. I suppose that makes sense, as the puts would only be exercised at expiration date. That is after the dividend is paid and the stock price would have dropped by the amount of the dividend. So the higher strike price puts would almost need to compensate for the drop in the stock price by the dividend amount.

However, the calls cannot be based on a price that would compensate for the dividend, as they can be exercised early. If their prices had the dividend built in, they could be bought and exercised immediately, and the exerciser could then collect the amount of the dividend twice.

There must be some way to take advantage of this disparity between the put and call prices. One must be over-valued for the expiration date and/or one must be under-valued for the expiration date, or a combination of the two. If so, it should make sense to sell the over-valued one and/or buy the under-valued one.

In the end, since I am selling the covered calls based on a high aROI (annualized return on investment, typically at least 30%), an early assignment is actually a goal. All it can do is increase the aROI. If I get through the ex-dividend event without being exercised, the held stock loses value and I receive the dividend in compensation. Then, the next goal would be to be exercised at the expiration date. I think those two goals typically would require a first or second ITM strike price. Depending on the relative aROI of course.

If my goal with a CSP would be to get to the expiration date without being assigned, I would also want the lower strike prices. Probably below the stock price less the dividend amount. However, I lose the possible advantage of early assignment. And at lower strike prices, the calls and puts are more in alignment.