Dumb question about selling short on ex-date

Discussion in 'Stocks' started by andersod2, Jul 9, 2007.

  1. Was just reading up on dividends and they talk about how it's not smart to buy before the ex-date thinking that you will get a free dividend. They say this is because the stock will adjust it's price by the dividend amount. What they don't say is what's wrong with selling the stock short before the date and capitalizing on the adjustment. I know there's a problem with this, I just can't think of it right now. Does the short price you entered with adjust too? What about options? Certainly the options don't adjust automatically, so how does that affect say the cost of buying a put before the ex-date? etc.

    Thanks in advance for any insight
  2. Midas


    If you are short you will owe the dividend. Your account will show a pending negative amount totaling the dividend amount. It will be debited on the payment date.
  3. ok that makes sense, thanks