GMR has runup from 33 to 45 or so in the midst of announcing a 15$ special dividend payable to holders I think march 9th but goes ex-div on March 26th. Is it reasonable to expect GMR to gap down 15+reg dividend on the ex-dividend day. After removing 15 dollars of cash from the balance sheet. Is the stock worth more than 30 bux? Is this a good way to gain 15$ per share taxable at dividend rate, take the short term capital loss to offset a short term gain and win out taxation wise? in other words.. I have a short term gain of $10k taxable at 30%+ already booked on another stock. if I buy X amount of GMR stock to gain $10k in special dividend taxed at 15% Sell GMR at 10k loss, and negate the $10k short term gain. save myself 15% tax??? opinions and dissection welcome
First, yes, you can be certain the stock will gap down roughly $15 per share on the ex-D date. The tax strategy will not work effectively, though, because there is a minimum holding period in order to get the reduced tax rate for a dividend received. I'm not sure if this is 30 days, or some other duration, but I'm 99% certain you cannot buy the day before the ex-D date and sell on the ex-D date and have a tax benefit to go with your essentially breakeven trade.
What happens if I buy PUT's on this stock? Do I pay the 15.00 to the PUT seller for the dividend? How is this settled or exactly what are the mechanics of such a trade? 11Blade
Tax stuff isn't my best area, so I can't help you there. I thought, however, that you should look over this memo from the OCC. Basically, it says that all GMR options are going to be adjusted by $15 on the 26th, so buying puts now probably won't help. http://www.optionsclearing.com/market/infomemos/2007/mar/22685.pdf Hope that helps.