How to handle dividends in SPY

Quote from ptrjon:

SPX ignores dividends.

SPY, if you're long you get paid dividends.
SPY, if you're short, you pay margin interest and pay dividends.

If you look at a price chart, SPY has been just about spot on for that time- I don't know what tests you're doing.
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So to get away from paying the dividends if your shorting SPY, you should instead go long the inverse etf such as SDS.

My question is:

How do the inverse S&P 500 ETF's get away with not paying dividends. I noticed that some inverse etf's such as SDS, actually paid out dividends in 2008. How is this possible, if the ETF's are supposedly shorting the stock.

Can anyone explain this to me?
 
Quote from ptrjon:

it's based off of derivitives contracts...

the contract probably doesn't involve the payment of dividends.
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I see that SH paid a pretty hefty dividend in Dec 2008: almost $12 or 14%. But that still doesn't quite explain how it lost more than 30% against SPY over the 18 months in my example.
 
Looks like SH uses leverage and derivatives and only targets the daily price movements, just like SDS.

I thought the 1X inverse funds were supposed to track the index over the long run.

Maybe just shorting SPY isn't such a bad idea after all. If you have to pay a dividend then the stock price should go down accordingly.

(BTW, SDS was down 55% from 9/30/2008 to 3/5/2010, where the SPY was about even.)
 
SH does the worst job of all in tracking. It's got to do with their set up, but any inverse ETF will have more tracking issues than a long, and this is based on the derivatives they use.


Why not test with the index futures?


Also, you can just go to the website of the ETF management company and probably find the info your looking for.
 
Quote from joe4422:

SH does the worst job of all in tracking. It's got to do with their set up, but any inverse ETF will have more tracking issues than a long, and this is based on the derivatives they use.


Why not test with the index futures?


Also, you can just go to the website of the ETF management company and probably find the info your looking for.
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I don't have any experience with futures. Also, where can I find historical prices for futures?
 
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