Dividend Play

Discussion in 'Trading' started by Free Thinker, Dec 18, 2002.

  1. does anyone know the exact time for dividend ownership record is?
    is it nyse close at end of day or something else?
    MO trades ex dividend tomorrow. dividend is 64 cents.could someone buy at close and sell aftermarket and capture the dividend assuming you could get it sold aftermarket close to the nyse close price?
  2. hmm......this sounds interesting......:)
  3. u130747


    I think when it opens tomorrow it will already have the dividend removed form the price.


  4. kean


    if that is the case why not short it? Either way there seems to be something were missing.:)
  5. If you short it, You pay the dividend.
  6. Same settlement date, so the buy and sell would "wash." I checked with NY on the timing of ECN trades, but the same thing applies, both long sales and short sales.

    Nice idea, but dividend "plays" are usually contingent on using options in connection with collecting the dividend. You cannot be a "holder" on ex-Div date (to receive the dividend), and also be short stock holder on the same date. Some players buy deep in the money puts, and also buy the stock, and exercise the puts the day after the ex-div date. This still is risky, since the the stock will open at a price lower than the dividend amount, but still be called "unchanged" ...i.e. xyz closes at 51.00, and has a 50 cent dividend, it will open at 50.50 "unchanged" so if you sold, you would take the market loss while waiting for the dividend.

    3 way "conversions" are sometimes used (long stock, short call, long put) for dividend plays as well, but since we have been doing these types of plays for decades, the Option modeling systems have the dividend included in the valuations.

    It really boils down to a simple thing, human nature, at times. Many who see the stock at a lower price (the dividend amount) are quick to buy some shares the day after dividend...running the price back up. When that happens, you can make out well....but as in most market plays, there is never a "lock"....just high and low probability techniques.