Go Back   ManagementParadise.com | Management & Business Education Learning Platform PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT > Financial Management

DIVIDEND ARBITRAGE

Discuss DIVIDEND ARBITRAGE within the Financial Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; DIVIDEND ARBITRAGE LONG ON STOCK SIMULTANEOUSLY SELLING THE FUTURES DERIVATIVE PRICES ARE ONLY ADJUSTED IF THE DIVIDEND EXCEEDS 10% OF ...

Reply

 

Thread Tools Display Modes
DIVIDEND ARBITRAGE
Old
 (1 (permalink))
Abhijeet S
abhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to beholdabhishreshthaa is a splendid one to behold
 
abhishreshthaa
Operations Manager at Management Paradise
Management Paradise Guru
 
Status: Offline
Posts: 7,045
Join Date: May 2010
DIVIDEND ARBITRAGE - September 13th, 2010

DIVIDEND ARBITRAGE


LONG ON STOCK
SIMULTANEOUSLY SELLING THE FUTURES


DERIVATIVE PRICES ARE ONLY ADJUSTED IF THE DIVIDEND EXCEEDS 10% OF THE MARKET VALUEOF THE STOCK MARKET


EG:-CASE STUDY OF HPCL


NEWS- INTERIM DIVIDEND WOULD BE DECLARED BY HPCL ON 5th FEB
24th JAN WITH HPCL CURRENTLY TRADING AT RS292, IT IS UNLIKELY THAT THE DIVIDEND DECLARED WILL BE OVER RS25 A SHARE.


IN SUCH A SCENARIO, THE FUTURES PRICE WILL NOT BE ADJUSTED FOR THE DIVIDEND.


THE FEBRUARY FUTURES ARE AT RS291, A ONE RUPEE DISCOUNT TO THE CASH PRICE.


ASSUME THAT HPCL DECLARES A DIVIDEND OF RS 20.


HERE TRADERS CAN BUY HPCL STOCKS SELL FEB FUTURES.


THUS TRADERS WILL ENJOY THE DIVIDEND WITHOUT INCURRING LOSSES FROM A FALL IN SHARE PRICES.


HPCL SPOT PRICE = 292
FEB FUTURES = 291(ONE RUPEE DISCOUNT IN CASH PRICE)


ASSUME HPCL DECLARES A DIVIDEND OF RS. 20

EX-DIVIDEND PRICE OF HPCL WILL FALL BY RS.20 IN CASH AND FUTURES MARKET


BY SELLING FUTURES, LOSS FROM STOCKS IS COMPENSATED BY PROFIT FROM FUTURES.

TRADER LOCKS IN AGAIN RS. 19 ,DIVIDEND LOSS , THE LOSS FROM HIS COMBINED STOCK AND FUTURES POSITION


Advertisements



Help Others > Network > Grow


Work with us part time/full time as forum moderator. Email us your resume on careers @ managementparadise.com PLS PRESS THANKS BUTTON IF U LIKED MY POST.


To view links or images in signatures your post count must be 0 or greater. You currently have 0 posts.
Friends: (0)
Reply With Quote
Reply

Bookmarks

Tags
arbitrage, dividend
Related to DIVIDEND ARBITRAGE
 

Similar Threads

Thread Thread Starter Forum Replies Last Post
Arbitrage and Its Type Abhijeet S Financial Management ( FM ) 1 April 11th, 2016 06:19 PM
ARBITRAGE IN THE STOCK MARKET Abhijeet S Financial Management 0 September 13th, 2010 12:53 PM
HINDRANCE TO ARBITRAGE IN INDIA. Abhijeet S Financial Management 0 September 13th, 2010 12:51 PM
ARBITRAGE ON BSE AND NSE Abhijeet S Financial Management 0 September 13th, 2010 12:48 PM
Meaning of ARBITRAGE Abhijeet S Financial Management 0 September 13th, 2010 12:42 PM
 


Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are Off


ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.



Search Engine Optimization by vBSEO ©2011, Crawlability, Inc.