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Trading E-Minis / SPDRS or Stocks
- Thread starter gr8stock
- Start date
Well, there is some dividend capture arbitrage. When the a stock drops due to ex-dividend, buying pressure could conceivably raise the stock price back up to its original amount. Some people might think the stock is cheap or don't care about dividends. So conceivably, but not entirely too likely, one might receive both dividend and capital gains.
JT47319,
You have a valid point that probably applies to individual stocks. However, ETFs are an entirely different animal because they are synthetic instruments that follow an underlying index, regardless of buying or selling pressure on the individual ETF. That is the same reason why illiquid ETFs are tradeable; the bid/ask prices will closely correlate to the fair value of the underlying index or stocks that comprise the ETF, regardless of supply or demand.
Deron
You have a valid point that probably applies to individual stocks. However, ETFs are an entirely different animal because they are synthetic instruments that follow an underlying index, regardless of buying or selling pressure on the individual ETF. That is the same reason why illiquid ETFs are tradeable; the bid/ask prices will closely correlate to the fair value of the underlying index or stocks that comprise the ETF, regardless of supply or demand.
Deron
Quote from JT47319:
Well, there is some dividend capture arbitrage. When the a stock drops due to ex-dividend, buying pressure could conceivably raise the stock price back up to its original amount. Some people might think the stock is cheap or don't care about dividends. So conceivably, but not entirely too likely, one might receive both dividend and capital gains.