Shorts, Pay The Dividend

Discussion in 'Trading' started by calibertrader, Nov 16, 2002.

  1. nitro

    nitro

    caliber,

    Aren't you at a professional firm? AFAIK, this is covered in the Series 7 test...

    nitro
     
    #11     Nov 16, 2002
  2. OHLC

    OHLC

    This rule is one of the most common worlwide. Applies in all exchanges I know of, including those who allow short positions without a lender for the actual stock.

    Figured this out while I was dumb and trying to get the dividend on an European stock hedged with its ADR. Did not work
    :D

    OHLC
     
    #12     Nov 16, 2002
  3. How long did that take you to figure out ...
     
    #13     Nov 16, 2002
  4. OHLC

    OHLC

    The time to get my SRD report...

    More accurately : I realized this when I received a SRD report
    listing some higher than expected fees on a stock I was short on, and understood then that hedging the original with the adr to get the div would not work.
    I was a newbie at this time...


    OHLC
     
    #14     Nov 16, 2002
  5. Try arbing options with bastard deliverables and the OCC screws up the report.

    Or, we screw up our databases ...
     
    #15     Nov 16, 2002
  6. OHLC

    OHLC

    How could they screw reports ??

    The OCC I mean, not your guys :D

    OHLC
     
    #16     Nov 16, 2002
  7. They may think they are right after God; but it happens ...
     
    #17     Nov 16, 2002
  8. OHLC

    OHLC

    BTW, the idea was not so stupid, since, on some exchanges, the short is not a sale of borrowed equity, but the sale of a synthetic contract ending at calendar's month end. The cost of carry is billed separately and autocovering, long + syn short, for example, is explicitly prohibited, which is sufficient to forbid getting the divs without risk on a single exchange.


    OHLC
     
    #18     Nov 16, 2002
  9. I did not know that ...
     
    #19     Nov 16, 2002
  10. I didn't say I didn't know it, I was surprised by how many didn't know the rule. So I figured this would be a good thread for those who didn't know the rule but would never admit to it.
     
    #20     Nov 17, 2002