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No I'm entirely correct in how it works and what would need to work. You on the other hand were incorrect in a couple of statements you made and then failed to respond with any actual intelligence to possibly defend your erroneous statements
No I'm entirely correct in how it works and what would need to work. You on the other hand were incorrect in a couple of statements you made and then failed to respond with any actual intelligence to possibly defend your erroneous statements
Alright I'll engage you. I've asked you to please educate me. You know the trade. What's the correct additional % of profit with each dividend and how does the price of the stock affect that profit?
the paying of a dividend is a neutral event if you reinvest it or it is taking money out of the investment if you don't .
imagine having a 100k in a stock paying 5%.so the night before the dividend you have have 100k , the next morning you have 5k in pocket and all exchange computers reduce the value of your holdings automatically before the open by the same amount .
so now you have 95k left compounding for the market to work on . if you reinvest you have the same100k compounding for you .
it is the appreciation in the stock that actually gives you your gain in all cases . the dividend is just them giving you back a piece of your investment the same as drawing the same dollars from a portfolio on your own .
drawing 5% from a non dividend portfolio that went up 5% as an example is the same as a 5% dividend from a stock that went up 5% in total return .
in both cases if you don't see at least 5% in return you have zero gain for the year and have the same or less than you did the start of the year . .
this is basic stuff!
Your also wrong in this case but I'll wait until/if Low responds to my questions before I respond.
really ? i hate to break it to you but if you think this is not how it works you better learn the basics before even discussing this stuff. it is 100% true . there is no gain from a dividend without the same appreciation in the stock price ,end of story .
all orders must be reduced by the payout amount before executing. that reduces your dollar value at the open by the same amount . in investing all compounding is on your opening dollars which are now reduced by the pay out amount . a 10% gain over the next quarter would now be on 95k which was the opening value not the 100k you had the day before . .
finra rule 5330
5330. Adjustment of Orders
(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:
no , i responded to low's comment and your comment to low.
Quote:
Originally Posted by Lowexpectations
Well it's not profit in and of itself so your assumed calculation is flawed. You would need price appreciation equal to or greater than the dividend. Absent that your stock price would decline exactly by the amount of the dividend so it wouldn't be a profit at all.
Have you looked at the specifics of the trade? This is a buy/ write with a net debit of 29.35 and the stock trading at 33.60.
Well specifically if you get called now you have only 65 cents before transaction costs. Furthermore a dividend paid quarterly doesn't equal additional profit without appreciation in share price equal to or greater than the dividend.
What is the net affect of the dividend ON MY TRADE in each instance?
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Uh huh.
