Can you buy stocks the day before the ex dividend date, keep until the record date, then sell the stock(cont.)?
then sell the stock a day later, then take that money from before and invest it into a company that is having it's ex dividend date tomorrow and keep that stock until its record date and just continue this process in a cycle to just keep getting companies dividends?
- A nobodyLv 79 years agoFavorite Answer
Yes you can do it.
But how much money can you possibly make, since you will profit by the amount of the dividend which you will receive, but you're at market risk since the price of the stock my drop below your purchase price - therefore you lost money on the trade. Also, the amount of your dividend received will be taxed ar ordinary income rate (or possibly higher), and if you do make money on the trade you pay tax in this gain.
And if you buy prior to X-Date you get the dividend, but you do not have to wait until record date to receive it, you can sell on or after X-date to keep the dividend.
You better have a considerable amount of investing capital since you must pay for all purchases before you sell the stock,. if you sell without making payment in full your account is restricted for 90 days or until payment is received AND you can not use the proceeds of the sale to cover the purchaseSource(s): from the street
- Anonymous3 years ago
1Source(s): Invest in Forex Tips http://teres.info/TheTradingCode
- LeslieLv 44 years ago
There is no guarantee that a stock will go down by the dividend amount on x-div day. On rare occasions, it goes up more than the amount of the dividend. As example, look at the stock TPZ. On Friday it was x-div to the tune of 12 cents. The stock opened at $25.70, which was exactly the previous day's opening less the dividend, then quickly recovered - and ended the day at $25.94. If you had shorted the stock ( no options on this one ) hoping to cover on Friday, you would have lost your shirt, and then some. And you will also be on the hook for the dividend payment to whoever bought your shorted shares.
- MikeLv 69 years ago
Sure but you will likely lose money and/or pay extra taxes. The closing price of stocks are adjusted downward by the dividend at about 3:30 am ET prior to the ex dividend date.
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- BIll QLv 69 years ago
Stocks usually go down in value on their ex-dividend date, on average by about as much as the dividend. So you will make money on the dividend, but lose money from the stock dropping in value. It ends up being a wash; you don't make money. If you consider brokerage commissions, you are likely to lose money.
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- Anonymous9 years ago
yes, but the selling price will probably be lower by the amount of the dividend, so you will probably LOSE money after paying 2 sales commissions and then will still have dividend income to pay income tax on
- John WLv 79 years ago
You'd want to buy about three to four days prior to the ex-dividend date to allow for the trade to settle and you'll find that the market has already priced the dividend into the price of the stock often dropping by the amount of the dividend as soon as it's too late for any purchase to settle in time to receive the dividend payments. Basically, millions of people already thought of that and have priced it out of the market.
Pat yourself on the back for ingeniously reinventing the wheel, too bad everybody and their grandmother beat you to it.
- Common SenseLv 79 years ago
You can do it as much as you like. Will it be profitable? Not likely.
If it was so simple... everyone would already be doing it.