Can you short a stock on its ex-dividend date?

[NewToTheTrade]

Ok you will probaly think that im an idiot for asking this question
Can you short a stock on its ex-dividend date? If so why don't more people do it?

Thanks

 

[notting]

Re: Newbie Question- Shorting a stock

What makes you think they don't?

 

[NewToTheTrade]

Re: Newbie Question- Shorting a stock

So you can..?

 

[tech/a]

Re: Newbie Question- Shorting a stock

Ok you will probaly think that im an idiot for asking this question
Can you short a stock on its ex-dividend date? If so why don't more people do it?

Thanks

Because it's not a cert to fall in price.

 

[Boggo]

Ok you will probaly think that im an idiot for asking this question
Can you short a stock on its ex-dividend date? If so why don't more people do it?

Thanks

It will have already dropped on the ex div day but may rebound from there so you are gambling that it will continue falling.
You can short it prior to the ex div day but you pay the dividend if you are short whereas you collect it if you are long.
The fine print of your broker/cfd provider will spell it out.

 

[pixel]

Re: Newbie Question- Shorting a stock

So you can..?

If a stock is shortable, it can be shorted on any old day.
Why would you want to short it specifically on the ex-day? I would think it would make more sense to short it the day before it goes ex-div. Sure, you'll have to reimburse the lender for the dividend they forego - because it goes to the person you sold the borrowed stock to. But very often, a stock will drop on ex-div by more than the dividend amount, especially when it's on the slippery-dip already.

Why don't more traders do it?
Because there's no certainty that any stock will drop by more than the dividend amount. Which makes it a risky business - probably even riskier than shorting per se.

Have you ever thought about the magitude of risk?

If you go Long a stock and the worst happens, you can lose 100% of your investment.
If you short a stock today and it goes into a Trading Halt next day, announcing a major find or take-over bid at three-times today's price, you've lost twice your "investment", plus borrowing costs and brokerage on top.

PS: Ours crossed, Boggo.

 

[Boggo]

Re: Newbie Question- Shorting a stock

PS: Ours crossed, Boggo.

Good explanation too, cheers.

 

[NewToTheTrade]

thanks for the responses you cleared it up for me.
One more quick question, can somebody give me a link to a website that has a list of all the companies on the asx.

 

[Tysonboss1]

thanks for the responses you cleared it up for me.
One more quick question, can somebody give me a link to a website that has a list of all the companies on the asx.

www.anyoldnewspaper.com.au/Businesssection

 

[LifeChoices]

thanks for the responses you cleared it up for me.
One more quick question, can somebody give me a link to a website that has a list of all the companies on the asx.

http://www.asx.com.au/asx/research/ASXListedCompanies.csv

 

[danbradster]

If you short the day before ex-dividend it'll likely fall overnight, but you'll have to pay the dividend rather than receive it. If you short on the ex-dividend date then the dividend has already taken place and the SP has likely already fallen.

 

[NewToTheTrade]

http://www.asx.com.au/asx/research/ASXListedCompanies.csv

Cheers

 

[Tyler Durden]

Sorry but what do you guys mean when you say he would "pay for the dividend"?

 

[pixel]

Sorry but what do you guys mean when you say he would "pay for the dividend"?

If you're shorting a stock, you've borrowed it from someone who wants to hold it through the dip, or who simply doesn't believe there will be a dip; the lender retains ownership, including the right to the dividend, and sometimes may also charge you a modest "borrowing fee".

If you've borrowed the share over the ex-div date, then the punter, who bought the shares off you before ex-div, doesn't care whether it was yours or not. But he most definitely wants to receive the dividend. As does the lender, whose shares you sold.
So, it's up to you to reimburse the lender for the dividend he's missing out on.

Hope that makes it clear.