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ScalpGuy

Shorting Ex-Date Stocks

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I understand the basics of stock dividends but I have not found information what is the point where you have to take care of the dividends (pay them out of your pocket) if you are shorting a stock?

 

I mean if I short stock at previous day of the Ex-Date and I hold the position over the Ex-Date I have to pay but what is the exact point for calculation? Is it the day change from previous to Ex-Date or is it the change from Ex-Date to the following date?

 

How about If I short the stock at during the Ex-Date closing the day flat?

 

Thanks

SG

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I understand the basics of stock dividends but I have not found information what is the point where you have to take care of the dividends (pay them out of your pocket) if you are shorting a stock?

 

I mean if I short stock at previous day of the Ex-Date and I hold the position over the Ex-Date I have to pay but what is the exact point for calculation? Is it the day change from previous to Ex-Date or is it the change from Ex-Date to the following date?

 

How about If I short the stock at during the Ex-Date closing the day flat?

 

Thanks

SG

 

If you are short on ex date at the close you pay the div. If you cover before the close you do not pay div.

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If you are short on ex date at the close you pay the div. If you cover before the close you do not pay div.

 

Jim - that is incorrect.

 

If you open a a position on the open of the ex date or any time thereafter there is no dividend to worry about.

 

The easiest way to understand this is that "ex" means "excluding".

 

So if you still hold a position at the close of the trading on the trading day BEFORE the exdate then you will either receive (if long) or have to pay (if short) the dividend.

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In most countries, dividends are rarely restricted to listed securities. So it's probably in the law of each country concerned regarding shareholding, dividends and dates (final cum dividend date, ex dividend date etc.).

 

For Australia check the Corporations Act. For USA check the SEC.

 

I only know these terms from my dealings with each of these exchanges from the perspective of a trader and also a data vendor.

 

"cum" and "ex" are actually legal terms derived from latin meaning "with/together with" and "without". So quite simply, when a security is "ex dividend" it no longer has a dividend attached to it. The "ex date" is when this happens.

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