Divident question

Discussion in 'Trading' started by TKOtrader, Apr 29, 2003.

  1. lets say a dividend is paid may 10th.

    i get in may 8th and stay in till may 12th.

    therefore i get paid the dividend (i think) --------- but how is it paid ? is it deposited directly into my account ?

    just wondering how its paid? am i gonna just see some extra cash in my account and assume its the dividend ?

    thanks alot--------------------------------tko
     
  2. you have to be in before the day it trades ex dividend.that is usually about a month before it is paid.then it is deposited into your account automaticly.
     
  3. thanks
     
  4. to get the dividend
    - buy stock on the ex-dividend day
    - hold it overnight
    - the stock will be marked down by the dividend amount the following morning (so if it pays a $0.50 div, the stock's price will trade $0.50 lower assuming no other market factors)
    - you are free to sell it in the morning or any day after
    - you will be paid the dividend on the pay date
    - if you are holding the stock short over the ex-div date, you pay the dividend.

    Hope that helps

    DNAJ65000
     
  5. you have to be in before the ex dividend day.it will open on ex dividend day less the dividend as unchanged.
     

  6. My bad. I stand corrected.:eek:
     
  7. Has anyone had good experiences with buying on the day before the ex-dividend date and selling on the ex-dividend date where the stock barely drops or even opens higher?
     
  8. Of course, but that's like saying has anyone bought a stock and had it open up a point the next day? If the dividend were 50 cents, and there were market factors that caused most stocks to open higher anyway, your stock could open up big too. Works in reverse also. No matter how you slice it, you are taking directional risk in holding an unhedged position overnight, dividend or not.

    Some data feeds automatically adjust the closing price by the dividend amount, and you can sell short a stock that opens down by it's dividend amount on the ex date with an opg order. So the dividend is baked into the price, but the stock will still trade based on market factors.
     
  9. What about a strategy of just buying high paying dividend stocks and writing out of the money calls on the stock every 2-3 months.Is it a viable strategy if you're targeting 40-50% returns a year?
     
  10. That's a lower risk option, since you have another leg to the trade to provide some extra income. But what about the instance where the market trends down and your long positions that yield 4-7% lose 20-30% of their value? Or news comes out on a stock and it gets cut in half?

    I like the idea of trading for a dividend capture, and I'm working on some ideas myself, but the open-ended market risk of common stock does not seem to be worth it to me. I'm focusing on preferred shares and exchange traded debt, which don't track equities at all, yet pay large dividends. They are very illiquid, but that can provide pricing inefficiencies that the patient trader can take advantage of.

    Corey
     
    #10     Apr 30, 2003