Warning: This page is only suitable for investors with significant experience on the stock market, that have been approved for short selling and option trading by their broker, and that are comfortable with short-term trading. If you do not meet these criteria, please refer to the Basic Strategy for Dividend Investing.

Dividend Strategy for Advanced Investors

Many high-yield stocks tend to display the following pattern around thier ex-dividend date: a long run-up while the stock is pregnant, followed by a shorter cool down. The biggest the dividend, the more pronounced the pattern.

You can play either the run up by buying the pregnant stock enough in advance, or the cool off by shortening the stock on or right after ex-dividend date. Sometimes you can also go long again a few days after ex-dividend, when the stock tend to return to its long term trend, minus the dividend amount.

These strategies can also be applied by buying calls and puts, if you want greater leverage, or if think there may be some downside to a particular stock. We try to mention any company-specific risk on the Smart Dividend board. In this case, using options or flipping in and out of the stock rapidly may be best.

The bigger the dividend, the more pronounces these patterns tend to be. Ideally, the dividend should represent at least 2 standard deviations from the standard stock price fluctuation over the last 50 days. This usually translates in at least 2-3% of the share value. The Smart Dividend board only posts dividends that meet this criteria.

See Also : Using Call Options, FAQ, Glossary, Dividend ETFs, Taxation.