Dividend capture

Tried this a number of ways - its tough cause everybody knows the deal and the stock drops the div amount, if you hold the stock you still have the market risk.

Even tried it by selling deep in the money calls, you get the div and don't lose any on the stock going down on ex-div date right, but alas, they call the stock away right before ex-div! So no money that way.

Capturing div as part of a pairs strategy is another way to try it also, my experience it was tough but don't dismiss making 10 cents profit can be a sweet deal if you put on enough size. :)
 
another way to capture the dividend is to buy stock before the ex date and sell deeply in-the-money calls against it. you need calls that have some time value in them, i.e. you do not want to sell calls for less than parity with the expected drop in price of the stock. to do this you may have to go out an extra month on the option series. you capture the dividend and ride the covered call until the time value bleeds out (at which point you can expect assignment and your stock to get called away) or you get stopped out on a sharp price drop. hell just sell leaps if ur lazy and hold the covered calls for a year or more.
 
A few of today's ex-dividends that worked out great from yesterday:
CBO div of .43 a share...only opened down .19
CCB div of .51 a share...only opened down .12
JPT div of .46 a share...opened down .52 but has run up and is currently down .30

So if you can find some non volatile stocks,like the above,with good dividends and just hold positions overnight to capture the dividend,it can work out to be a great strategy.
 
Quote from Avalanche:

There was this guy who started at an office I used to trade at about 2 years ago, and this dividend capture was his entire strategy.

It was all he did.

He opened an account, and started trading the strategy while we were teaching this week long class on how use the software, interperate the level II and all that nonsense they taught back in the day.

So what happened with his trading. Well, he basically broke even after about 5 weeks of doing it, so it must have been slighly profitable because he was covering the juice and everything.

Then you will never believe what happend.

This has nothing to do with the actual dividend strategy but it is funny if only because it shows what things were still like during the last months of the "bubble" even as the market had begun to roll over.

He bought one of the fuel cell stocks because he heard on CNBC I think that they were paying a dividend in STOCK. Even the press release said that. It was 3 for 1 or maybe even 4 for 1. Anyway, he buys like 1000 of it about 2 weeks before the ex date, and the stock immediately goes down a lot. He is a bit freaked out because until then all his trades had been pretty planned out, and most of the companies were boring old economy stocks. This thing was trading at 100 per share or something I think.

Anywa after 2-3 days he gets so concerned that that he asks me about it, I don't know that much about dividends or ex dates, but I look at it with some other people and as far as we can tell it is a stock split, the press release refers to it as a stock dividend or something, but it was pretty clear that it was just a stupid stock split. So that is what we told him.

Anyway, long story short, he gets on the message boards and convincences himself that he is right, he is total denial, and the thing keeps dropping, I think they even did a spot secondary or something during the two weeks he is waiting for his additional shares and price it 4-5 bucks below the previous days close.

Finally the day before the "dividend" comes and he is still convinced that he is going to make up for his horrible loss because as soon as he gets those additional shares he is going to sell them and abandon the strategy (the irony is, this was never a part of his strategy, duh).

Well, ofcourse as everyone reading this knows by now, the he gets his additional shares alright but the stock opens 40 points lower (or something) the next day off the SPLIT. I think he covered for 50% loss in two weeks that day since he was margined.

I kid you not, he called and spoke with the CFO that day and demanded to know why the press release had referred to the "split" as a dividend.

Whatever the CFO said, must not have been good enough, because he said he was gonna sue and stormed out and we never saw him again.
:eek:
More...

Absolutely hilarious - we all get what our lunacy deserves. Feel sorry for the poor CFO ... FYI (not that anyone cares) but in Taiwan the vast majority of tech. companies issue stock dividends each year and they are referred to as such - kind of makes is sound like shareholders are getting something beyond modest price appreciation. I've never heard a local discuss a 'stock split' though obviously they are effectively equivalent.
 
You must log in or register to reply here.
Back
Top