Stock Chat: possible CFD trade for Rio today?

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possible CFD trade for Rio today?

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Category: Market Discussion
Forum Name: Stock Chat
Forum Discription: Discussion about stocks and markets.
URL: http://www.bullcharts.com.au/forum/forum_posts.asp?TID=332
Printed Date: 07 May 2024 at 6:50pm
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Topic: possible CFD trade for Rio today?

Posted By: Monyet
Subject: possible CFD trade for Rio today?
Date Posted: 21 Feb 2006 at 9:39am

thinking of buying in Rio - to take advantage of ex div date tomm.

anybody got any thoughts?

Replies:

Posted By: chart rider
Date Posted: 21 Feb 2006 at 8:24pm

Monyet

I didn't see your post in time, but buying a stock the day before XD date to take advantage of the div is a non viable strategy. Go back over some charts and you will notice that on XD date the value of the stock generally loses value equal to the dividend amount. In some cases the drop will knock the wind out of the stock for some period of time, other times the price will recover soon after - there is no general pattern to the recovery characteristics.

However, it is a viable strategy to consider buying a stock a few weeks before XD date. In many cases the stock will rise before the XD date, and it is possible to exit either the day before XD, or take the dividend and see if the stock will go up again soon after. If the stock continues to fall after the div date and hits the stop loss, then the capital gain may be some where around break even, but the dividend is in the bank.

Posted By: Cobra
Date Posted: 22 Feb 2006 at 4:01pm

Looking at RIO today after the fact, you would have made money on a short CFD. I think generally after this round of ex div dates are over the market will struggle to find support for a while, let alone go through the 5k ASX200. Orica looks to be bucking the trend though, plenty of support the last few day's.
US markets are very volatile, and are having trouble finding a good reason to move through 11k (Dow) convincingly.

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