3 ms·
wouldn't this be something already arbed out? Dividend dates are known -- one can make a quick buck shorting if one knows for sure the price will change.
by etangent 5y ago
wouldn't this be something already arbed out? Dividend dates are known -- one can make a quick buck shorting if one knows for sure the price will change.
- deleted 5y ago[deleted]
- Scoundreller 5y agoSort of. There’s taxation différences that vary based on where the account holder is based, so the drop won’t exactly equal the dividend amount, even if it was paid immediately.
- quickthrowman 5y agoThe price is adjusted on ex-dividend day. You can attempt to arb dividends with options, but the algos will beat you.
- noitpmeder 5y agoIt is pretty visible in most instruments. If you're calculating a simple expected price of a stock at the open it's pretty normal to take the closing price from the prior trade day and adjust it based on any corporate actions (dividends, splits, ...). Now whether or not this is actually the price that the instrument will trade at is a different story, but it's a good initial estimate. Market data and other activity will quickly inform you as to the actual price.
- cecilpl2 5y agoNo, because if you short at close on ex-dividend and buy back at open the next day, ceteris paribus you gain the stock price delta (which is exactly equal to the dividend), but you also owe the amount of the dividend to the person you borrowed the stock from. You end up netting nothing.
- etangent 5y agoah that makes sense, ty very much
- csomar 5y agoIf you short, you'll pay both interest AND dividends on that stock.