Dividend Payments

[the pro]

Hi Guys

Looking for advice from all the spread betting experts on here, regarding dividends.

Lets say you have a stock at 940 and a stop at 900 and the dividend is 40p. Do you guys remove the stop completely on dividend day at least at the opening or move it down, so it doesn't get hit prematurely, and then move it back up later on the day.

Just looking for advice really from a newbie to spread betting.

Thanks in anticipation.

 

[toknees]

Hi Guys

Looking for advice from all the spread betting experts on here, regarding dividends.

Lets say you have a stock at 940 and a stop at 900 and the dividend is 40p. Do you guys remove the stop completely on dividend day at least at the opening or move it down, so it doesn't get hit prematurely, and then move it back up later on the day.

Just looking for advice really from a newbie to spread betting.

Thanks in anticipation.

I'd move it. But it depends on your system. I eod trade and require a position to close below my stop to trigger an exit at the next open. So my stops are not set in the spread betting platform and I handle them manually. Obviously, it means you can suffer slippage, but it prevents a big intraday swing from taking you out prematurely (which could have taken me out of several winning trades).

 

[the pro]

I'd move it. But it depends on your system. I eod trade and require a position to close below my stop to trigger an exit at the next open. So my stops are not set in the spread betting platform and I handle them manually. Obviously, it means you can suffer slippage, but it prevents a big intraday swing from taking you out prematurely (which could have taken me out of several winning trades).

Hi Toknees

Thanks for your reply. I also operate an EOD system, methodology. I take it then you just close your position when it hit's your mental stop. Are you not worried that you don't have a stop in place if the unexpected occurs. I suppose you could have a stop a fair bit away, for disaster purposes and then close at your mental stop, when hit. Are you checking them through the day?

Thanks again

 

[toknees]

My stop is determined when I open the trade and determines my trade size. It's an essential part of my system, and is adhered to without question when it is breached, it's simply that I don't feed that stop into the platform, I execute it manually. I don't need to check during the day (although I often do!) as my system only validates a stop signal if the position closes below the stop. As a trend follower, the stop is moved slowly higher, and eventually I will end up letting some profit slip away, but that could be 2% after a 50% move - the idea is to keep my winning trades open as long as possible, and quite often you'll see a market sell-off that rights itself an hour later. This does of course mean that you can exceed losses further than you intended, but it sometimes the slippage occurs the other way and you come out better off. It's a numbers game and over 20-40 positions this seems to work better for me.

I have toyed with the idea of setting a stop in the platform at twice my initial position size for safety, but this would have actually cost me money in the last few months. I was in XRX which was doing pretty well until a nasty earnings report. If I'd had a stop in the system, I'd have stopped out at -2x my original position at the lowest point of the day. As it is, the next morning it gapped up a little when the market decided it had overreacted and my loss was reduced to -1.5x my original position. It could easily have gone the other way though!

 

[barjon]

Hi Guys

Looking for advice from all the spread betting experts on here, regarding dividends.

Lets say you have a stock at 940 and a stop at 900 and the dividend is 40p. Do you guys remove the stop completely on dividend day at least at the opening or move it down, so it doesn't get hit prematurely, and then move it back up later on the day.

Just looking for advice really from a newbie to spread betting.

Thanks in anticipation.

Look at your SB company small print to see what proportion of the dividend they pay you by crediting your account - probably find it's 80%.

So, in your example, your account would be credited by 32p although they knock 40p off the price. To maintain the same potential overall £ loss position that you were in before the dividend adjustment your stop would be 868.

 

[the pro]

Hi Barjon

Thanks for the reply. I think I understand what you are saying, this begs two further questions.

So do you get stopped out in this situation?

Is it better to avoid trading around dividend date days. My average winning trade is around 14 days. Obviously some are longer, some shorter.

Many thanks

 

[barjon]

Hi Barjon

Thanks for the reply. I think I understand what you are saying, this begs two further questions.

So do you get stopped out in this situation?

Is it better to avoid trading around dividend date days. My average winning trade is around 14 days. Obviously some are longer, some shorter.

Many thanks

1. If you'd left your stop at 900 you'd be stopped but, overall, you'd only lose 8 instead of the 40 that you had catered for because 32 would have been credited to your account.

2. Not necessarily, but you're always going to lose 20% of the dividend overall so it's always going to cost you a bit to stay in. Up to you to decide if it's worth it. Much depends on the state of the market - in a raging bull shares will probably make up the dividend adjustment very quickly.

 

[barjon]

ps: don't forget if you're short that your account will be debited by the full dividend amount

 

[the pro]

ps: don't forget if you're short that your account will be debited by the full dividend amount

HI Barjon

Thanks for your informative reply. something else to add to my "Spreadsheet" littered with warnings.Don't really want to be getting stopped out through this process, will have to consider best way forward.

Thanks again, really constructive.