Nasdaq Trader, I suppose you also noticed that these stocks went ex-dividend today: D (.525 dividend, closed down .71), GS (.12 dividend, closed down 1.36), and CAG (.104 dividend, closed down .19). Agree that low volatility stocks minimize the risk, but also minimize the gain potential as well. But good luck to you.
One other thought I had on this strategy. If it works as desired, you have a short term capital loss that is exceeded by the dividend income. But for regular retail traders/investors, capital gains loss is limited to $3k a year and can't be further used to offset dividend income. So unless you have other capital gains to offset this, the tax issue will mess up your cash flow.
Like to see a stat study: the probability of a stock closing at or above it's closing price 1 day before ex-dividend date on the record date, and up to so many x days later. ( FOR A UNIVERSE OF ISSUES)
Interesting to see this thread. I've thought of morphing my IRA into a swing style, paying attention to dividends. I tend to follow more stable stocks. A handful I've watched and held for years. I think I can play them 2 weeks to 2 months for 50 cents to 2-3 bucks. So one stock I might be in and out of 5-8 times in a year, roughly holding it about half the time. (I'm thinking of doing this in my IRA, which means I can only go long.) The trouble with dividends, in my book, would be if you let the timing of them adversely affect your entry or holding period. But I haven't paid that close attention to price drop in relation to dividends. I'll certainly look more closely at that. André
So if you have $100,000 in dividends for the year and $100,000 in capital losses,is it true that you only get to deduct $3000 of that $100,000 loss,but still have to pay taxes on the $100,000 in dividends?
NasdaqTrader, Yes. You detail 100% of your dividend income on Schedule B. The total goes onto Line 9 of Form 1040. Capital gains are computed on Schedule D which, when you follow the form through, limits net losses to $3000. This is carried forward to Line 13 on Form 1040.
Anyone with a prop firm that issues k-1's can answer this...would the above situation be treated differently,namely,would the $100,000 in dividends be offset fully with the $100,000 in losses?Also,does the $3000 capital loss deduction limit apply to prop firms?
My understanding is that if you are with a prop firm, all your income is treated as partnership income, since you are actually a partner in the firm. All that matters is the bottom line, not how you got there.