What Does It Mean For A Stock To Trade Ex-Dividend A Short Term Tactic for Capturing More Profits

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A Short Term Tactic for Capturing More Profits

It is called “dividend capture”. This strategy is executed

when a trader buys a stock just before the ex-dividend date, so

that he or she will be a shareholder of record on the record

date, and will receive the dividend. Because the stock falls by

the amount of the dividend on the ex-dividend date, the

strategy calls for the trader to then wait for the stock to

move back to the price where he or she bought it before the

ex-dividend date. At this point, the stock is sold for a

break even trade. Thus the dividend is received, or captured by

the trader with no further exposure to the movement in the

stock price after it is sold for a break even.

When attempting to execute this short term trading strategy,

look for stocks with high volume, and a relatively large

dividend payment. Higher volume facilitates exiting the

position without affecting the stock price. The high dividend

allows for more profit potential. Use of a discount broker is

also beneficial as it will reduce the overall cost of the

trade, and increase the return of implementing the strategy.

Please note that this is an aggressive trading strategy, and

not appropriate for everyone. Study the concept. “Paper

trading”, or practicing the strategy before using actual money

is always a prudent step when implementing new strategies

into your portfolio of trading tools.

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