On June 2, the Options Clearing Corporation (OCC) filed with the Securities and Exchange Commission the proposed rule change which would adopt interpretive guidance relating to the new adjustment method for adjusting options contracts for cash dividends or distributions (New Methodology). Generally, options are not adjusted to reflect “ordinary” cash dividends or distributions. Under the OCC’s existing By-Laws, which remain operative until the New Methodology becomes effective, a cash dividend is considered ordinary unless it is greater than 10% of the value of the underlying security on the dividend declaration date. Dividends greater than 10% under this definition usually trigger an options contract adjustment, with the criterion for adjustment being the size of the cash dividend. Under the New Methodology, a cash dividend or distribution will be deemed to be ordinary (regardless of size) if it is declared pursuant to a policy or practice of paying such dividends on a quarterly or other regular basis. Dividends paid outside such practice would be considered extraordinary.

http://sec.gov/rules/sro/occ/2008/34-58059.pdf