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Strategies & Market Trends : Dividend Trading/ Upcoming ex-dividend dates
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To: PitBull who wrote (9)5/12/1998 10:17:00 PM
From: Wayners  Read Replies (1) of 16
 
As Mr. Chen points out, when a company pays a dividend, the stock price drops almost exactly by the amount of the dividend. You aren't making any money by collecting the dividend and you are simultaneously incurring taxes on the dividend. Its like having to pay income tax on no income. Shorting a stock or buying puts before a dividend drop doesn't work either. If you short the stock, you have to pay the dividend on the borrowed shares, so there goes the divided payment. Another net zero play. With puts, the price of the dividend immediately gets factored into the price of the puts. The value of the puts goes up exactly by the amount of the proposed dividend as soon as the dividend is announced. If you can buy puts in anticipation of a surprise, not a regular dividend announcement, you CAN make money. Good luck with those predictions though. Its probably easier to predict stock split announcements.

All new dividend announcements are posted in the Wall Street Journal everyday. Same table is in the Investor's Business Daily. Take a look. There are also plenty of stock screens that will give you a list of all companies paying more than 8% annual dividend yields. My advice is to forget about playing dividends. Get good at technical analysis and start flipping stocks and when you are really good at flipping stocks, take 10% of your risk capital and flip options with that. You can generate "dividend" sized gains in days with stock flips where you are actually making money. Try buying stocks in anticipation of earnings announcements. Find stocks that are on really long term uptrends like DELL and buy the stock a couple weeks before the earnings release. Sell before the actual earnings are released. Good luck.
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