CFDs and dividends trading strategy: your thoughts?

[troyxlr8]

Hi All,

I want to run a trading idea past you. Im sure its probably been thought of before but here goes..

So I've noticed when a company gives out its dividends, the day of the ExDate it drops by .80 cents or whatever the dividend is. But heres the key, Ive seen with most of the stocks Ive looked at,

TEL share price before the ExDate is $4.50,
The Day of the ExDate it drops to $4. So if you buy long, usually within a couple of days the price jumps back up to $4.50 again but sometimes only $4.40.
So if you buy long with an expected target of 80% increase of the dividend back, its worked out successful.

I dont have any software that would allow me to backtest it on dividend payouts so I turn to you guys to ask, whats your thoughts?

 

[cbc1]

Hi m8,


Sound good, providing you don't meet any volatality issues.

I can't really help you with how to make money off this however I can help you not to lose money.

Have you traded any CFDs before? They are illegal in a lot of countries for a reason. What broker were you planning on using?

 

[DJG]

Search for 'dividend stripping' or google search it, there is another form of trading around ex div date..forget what it's called.

This can work, but not always otherwise everyone would do it.

There is also a thread on here where someone (sure someone will fill it in) traded a strategy of capturing franking credits along with the run up to ex-div date.

Perhaps paper trade it mate, look at a list of all upcoming dividends and try it out. If not, manual backtest, Yahoo or Google finance charts can display dividend dates. 'pretend' to buy the day of ex dividend date and sell a few days later...see how you go

 

[beachlife]

I use a method that from memory was in one of Jody Ellis' books. That is trade the run up that often occurs around 10 days before the ex div date, but only if the chart agrees. I just did it with anz.

I bought near close on 24/4 at 29.95, stopped out on 7/5 at 31.30

Then I looked to see what happened in May last year after the ex div date. There was a fall for a couple of weeks after ex div so hoping for history to repeat I went short on 10/5 when previous day low was taken out and am still in.

WBC did the same run up but didnt trade it as was in anz.

I tried similar for NAB but last couple of days killed that.