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The adjusted price reference you made is axiomatic. Adjusted prices simply subtract the dividend. It does not reflect market value. You'll notice the open on th
by JDDunn9 11y ago
The adjusted price reference you made is axiomatic. Adjusted prices simply subtract the dividend. It does not reflect market value. You'll notice the open on the day after the dividend, the stock actually went up $0.40 from the closing price.
When shorting, you only pass the dividends through. The company sends you the dividend, you send it to the original owner, you could still profit from the drop in share price.
- tomp 11y agoWell, the stock price might have changed because of some news or general market sentiment. I guess I could have found a better example, a stock where the dividend is much bigger (percentage-wise), the effect would be much clearer then. Edit: e.g. EWM (an ETF, I think) https://uk.finance.yahoo.com/q/hp?s=EWM&d=3&e=4&f=2016&g=d&a=3&b=1&c=1996&z=66&y=66 https://uk.finance.yahoo.com/q/hp?s=EWM&d=3&e=4&f=2016&g=d&a... No, shorting doesn't work that way, obviously. "Shorting" means you sell he stock, so the new owner gets the dividend, not you. That's one reason shorting equities is very risky long-term.
- JDDunn9 11y agoThe ex-dividend date is an implementation flaw that makes the stock price discontinuous at the dividend date (I initially misunderstood this). However, in theory, a pro-rata dividend would be continuous.
- tomp 11y agoYes. That's what happens with bonds (clean vs dirty price). It's more complicated with equities because the size of the payout isn't known in advance.