![]() ![]() When you sell a call option, you receive the premium. Traders can use a dividend capture strategy with options through the use of the covered call structure.Ī covered call is a strategy by which you buy the underlying security while selling an equivalent amount of call options to “cover” the position. Review Dividend Capture Strategy Using Options Accordingly, you may not be any worse off than investors who had bought before the ex-dividend date. Because shares decline by the dividend amount, holding all else equal, if you buy on or very shortly after the ex-dividend date, you may actually obtain a discount when the share price drops. However, because of the equivalent decline in the share price on the ex-dividend date, you may not necessarily “miss out”. Traders using a dividend capture strategy will want to buy in before the ex-dividend date. Most brokers, to avoid swings in portfolio value caused by the ex-dividend related drop, will credit accounts with a “dividend payable” between the ex-dividend date and the payment date.Īn example timeline of this process could go as follows: ![]() When shares go ex-dividend, the share price will decline by the amount of the future dividend to be disbursed, as it represents a cash outlay (i.e., a decrease in the company’s assets, thus lowering its equity value). It is usually within 30 days of the ex-dividend date, and normally no less than 5 days. The payment date, also called the pay date or payable date, is when shareholders actually receive the dividend. The record date is often set two days after the ex-dividend date. ![]() Only shareholders who are registered on the company’s books as of the record date will receive it. The record date is the date at which a company will look at its list of shareholders and determine who will get the dividend. The ex-dividend date is often called the ex-date. To receive the dividend, you should be in the stock at least by the evening of the day before the ex-dividend date. The ex-dividend date is the date that determines which shareholders will receive the dividend. Some pay monthly.įor example, a company could communicate that it will issue a dividend of $1.00 per share on said date. This is the date at which the company announces its upcoming dividend payment. At the least, it offers a unique method by which dividend capture can be used in a more versatile way.įirst, some terminology: Declaration date Using a covered call, a dividend capture strategy can possibly be more efficiently employed. Traders who use a dividend capture strategy usually trade in and out of a stock to obtain the stock’s dividend without having to hold it long-term.
0 Comments
Leave a Reply. |