So if you're short SPY then you have to pay the dividend. But what if you're long SH? If not, can you go long SPY and long SH before the ex-div date and college the dividend on SPY? I know SPY will go down on the div date and SH should go up by the same amount, but if you don't have to pay a dividend with SH this seems like an arb opportunity. Discuss.
the Fund pays on the stocks not the end shareholder but the fund's NAV will react to the net difference of the div. When SPY pays a dividend it is the ETF/Fund that is paying, not the underlying - SH and SPY may pay different rates or at different times or the cost to finance the short or long exposures may be different so things will not always offset perfectly. In addition you have to look at the underlying baskets to see if they are the same.
I was told that you do not pay dividend on inverse ETF, and in fact you recieve dividends on inverse ETF's. this is because inverse ETF's are not actually straight up shorting the indices but rather they used some kind of derivatives to simulate shorting. or so i've been told.
If you short SPY you pay dividends. SH invests in derivatives, it is not short SPY so you don't pay any dividends.
As far as I'm concerned, SH is short SPY. It's not exact, but it's close enough. And you don't have to pay margin interest on your position.