THE WOLF2222
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Dividend payments that are equivalent to the value of those paid on the underlying equity are credited to your account on long CFD positions (and payable on shorts). This had me thinking:
As positions are leveraged, then the equivalent dividend yield on, say, a CFD that required a 10% margin would be magnified 10X.
The market price of a share will generally take account of forthcoming dividend payments. Lets say it increased by 5% just before the share goes ex-div. If the dividend yield was to be around 5% there would be little or no financial gain in taking a short term trade just to receive the dividend.
However....
The CFD on that share is leveraged, so a 10% margin requirement would expose you to 10 times as many shares, and would you not also receive a 'magnified' dividend? (Equivalent to that on the underlying). Why not buy huge quantities of CFDs just before the ex-div date and then sell them immediately afterwards to receive this 'leveraged' dividend payment in your favour?
I know I have missed something here....please explain it to me.
As positions are leveraged, then the equivalent dividend yield on, say, a CFD that required a 10% margin would be magnified 10X.
The market price of a share will generally take account of forthcoming dividend payments. Lets say it increased by 5% just before the share goes ex-div. If the dividend yield was to be around 5% there would be little or no financial gain in taking a short term trade just to receive the dividend.
However....
The CFD on that share is leveraged, so a 10% margin requirement would expose you to 10 times as many shares, and would you not also receive a 'magnified' dividend? (Equivalent to that on the underlying). Why not buy huge quantities of CFDs just before the ex-div date and then sell them immediately afterwards to receive this 'leveraged' dividend payment in your favour?
I know I have missed something here....please explain it to me.
