hi all. first time posting here - hope this isn't a dumb question!
i first learned of these things from a Marcus Padley article published in SMH a few months ago, and thought it was worth looking into, so i observed the ANZCD and WBCCD quotes after both of those went ex-div earlier this month. i found that for both of them, every time i checked the CD quotes they were only trading higher than the underlying ex-div ticker at the same time by the div plus 4-5c tops, sometimes only by the div + 2c - that is far less than the franking credits an entity being taxed at 0% would receive back.
i do most of my share trading within a trust, which has some beneficiaries in there who don't earn any income. after they bumped up the tax free threshold, i can operate off a 0% tax rate for quite a while, which makes trading CD quotes seem an attractive idea.
the SMH article gave the general gist of it but was a bit short on specifics (i guess Marcus would prefer readers to ask his broking firm for advice if they're interested) so i'm hoping to learn a bit more about how these work before running off and trying to trade them. earlier this month, on ex-div day i observed WBC trading at 31.70 and WBCCD at 32.70, so:
- if i buy WBCCD on ex-div day, when the ASX stops quoting WBCCD 2-3 trading days later, i'm assuming my WBCCD just converts to the normal WBC units? if so, what day exactly does this conversion happen?
- i'll get the 96c dividend paid along with everyone who held WBC the day before it went ex-div, ie. on Jul 2, with the ~41c franking credit entitlement?
- does the period for the 45 day rule start from the day i buy WBCCD, or the day that they convert to WBC?
- say the div strip strategy turns out pretty well, and WBC rallies to 32.50 by the time the 45 day rule is met for this holding. if i opt to sell the WBC at that point, is that a 20c capital loss as the WBCCD buy price of 32.70 is considered the cost base? or is the cost base considered to be whatever the WBC price was at the time of conversion from WBCCD to WBC?
anyone trade CD quotes or know how they work? did some various searches but didn't find anything - guess they're not used much by the retail investor. is it something worth exploring for someone in a 0% tax structure? or are these not feasible for the retail investor to trade?