Dividend Trading / Scalping / Stripping

This is a discussion on Dividend Trading / Scalping / Stripping within the Trading Journals forums, part of the Reception category; aeu97137 SB companies pay 80% of the dividend , Spreadex pays 90% i think , and its clear that you've ...

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Old Apr 6, 2014, 12:19pm   #9
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aeu97137

SB companies pay 80% of the dividend , Spreadex pays 90% i think , and its clear that you've ignored the bid-ask spread , slippage ( especially at the open ) , overnight gap risk and rollovers = No free lunch .

Last edited by tar; Apr 6, 2014 at 12:28pm.
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Old Apr 6, 2014, 12:50pm   #10
 
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What I'm really trying to say is that what s/he proposes may not be a robust stand alone strategy. By the same token, if he removes this element and just trades the residue of the strat' - then that too may not be viable. But, combining the two may provide him/her with an edge. The whole is greater than the sum of its parts . . .
Tim.
With respect Tim, combining two unviable strategies I think is more likely to result in one really bad strategy than a modestly winning one.

Dividend arbitrage teams at the IBs have some very clever people with very big computers syphoning off pennies (albeit millions of them) on the small discrepencies that arise from ex-dates: the chance of a retail punter managing to make anything from this consistently given the costs they have to bear is, frankly, zero. This is a typical 'in front of a steamroller' strategy where someone thinks they've found the holy grail because they have a series of small wins, before getting wiped out by the inevitable big loss.
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Old Apr 6, 2014, 1:38pm   #11
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With respect Tim, combining two unviable strategies I think is more likely to result in one really bad strategy than a modestly winning one. . .
Hi Jo'C,
Ah, apologies, I don't think I've made myself clear. What I was trying to say was that if you take a single strategy that comprises two (or more) distinct elements that complement one another, each of which may not be viable on their own but, when combined together, provide the trader with an edge. That's slightly different from having two separate and unviable strategies that, when combined, the trader hopes will magically turn into a viable one. Two negatives don't make a positive etc. I agree with you completely about that.

Regarding your broader point about dividend arbitrage, I don't doubt that you're right. What concerns me though is that your comments could be extrapolated and applied to just about any strategy one reads on a retail forum such as this one. Perhaps I'm reading too much into what you said but, for the reasons you've given, do you think all retail traders (not just the OP of this thread) are on a hiding to nothing? That's regardless of the market and methodology they trade?
Tim.
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Old Apr 6, 2014, 2:01pm   #12
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Where would you put your SL in this ?
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Old Apr 6, 2014, 2:04pm   #13
 
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Perhaps I'm reading too much into what you said but, for the reasons you've given, do you think all retail traders (not just the OP of this thread) are on a hiding to nothing? That's regardless of the market and methodology they trade?
Tim.
No, retail traders can certainly win - but where they are on a hiding to nothing is on any arbitrage type strategy (such as this), which will have been bled dry by professionals using infinitely quicker technologies and infinitely smaller spreads/costs. Retail punters can do okay as long as they're not trying to take on the IB/pros at their own game - either ride the coat-tails or travel in uncharted waters.
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Old Apr 6, 2014, 9:54pm   #14
 
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aeu97137 started this thread Thanks for everyone's comments - many interesting and valid points.

I am using an account with IG who pay 90% of the dividend and do not adjust your underlying position. The rationale behind buying just before the ex-div and closing the trade as soon as possible after the ex-div adjustment is in order to minimise the risk of wider market movements during the holding period.

I suspect I am having a good run due to it being a bullish market, I am not convinced my trades would be as successful on strong down days or in a bearish market.

In terms of my first few trades:

1. Buy PRU 25/03 @ 1330, £1/point. Sell 26/03 @ 1324 = -£6.60. Div: £23.84. Net +£17.24
2. Buy RSL 02/04 @ 303, £4/point. Sell 03/04 @ 292 = -£42.76. Div: £56.36. Net +£13.60
3. Buy PSON 02/04 @ 1044, £1/point. Sell 03/04 @ 1017 = £-27.00 Div: £32.00. Net +£5.00
4. Buy AV. 02/04 @ 493, £3/point. Sell 03/04 @ 487 = £18.24 Div: £28.20. Net +£9.96

Position sizing is based on aiming for approx. 1% of bank for each pt movement in each share price.

I'll do another post soon about possible trade opportunities coming up this week.

JH.
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Old Apr 6, 2014, 10:09pm   #15
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Hi, just because i said it wasn't for me, doesn't mean i think you shouldn't look into it, we all do trading differently, you may work on this and find it's your "thing" even if others including myself think that the odds are against it. I'm sure others may look at my style and not be able to do it, i feel alot of what's involved intrading is down to personality as much as anything else.

Regards Shane.
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Old Apr 7, 2014, 8:45pm   #16
 
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aeu97137 started this thread For trade opportunities I look for FTSE350 companies going ex-div paying a dividend >2%.

Large, liquid shares offer maximum opportunity for price fluctuations during the ex-div day which increases the chances of closing the trade for a profit.

Opportunities can be identified from upcomingdividends .co .uk

Targets for this week:

SL. 2.70%
GRG 2.58%
ESUR 4.85%
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