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URL:  http://boards.fool.com/but-your-principal-would-not-be-guaranteed-30460823.aspx

Subject:  Re: Retirement, college, and Obamanomics Date:  1/1/2013  9:43 PM
Author:  Rayvt Number:  71181 of 78168

But your principal would not be guaranteed against loss

Oh, please!!
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As a general comment ... we happen to know how the insurance company effectuates this (the same basic way that these articles outline), but that doesn't matter.
In the IUL contract, there are only 2 parties, you and them. *How* they manage the investment is their concern, so these side discussions of buying options, etc. have no bearing. They could be buying Russian Yak milk futures for all we know. It doesn't matter and we don't care--they just are obligated to pay us based on the S&P500 index.

Nonetheless ...... the market pays dividends. If you own the stock you get the dividend. If you are short the stock then you have to *pay* the dividend. If you buy an option (as we assume the insurance company does) then some counterparty had to sell the option, and is therefore in a short position in the stock. Which means that they have to pay the dividend. Which they are not about to do, not going to pay out a dividend from their own pocket. They are not handing out free money. If you trace down all the details of the stock and the derivatives (the options), you'll see that if the stock pays a dividend, then all the various owners of the longs and shorts and options on aggregate receive exactly that dividend, perhaps directly, perhaps indirectly.

This is a roundabout way of saying that even though a call o