Spread Betting Dividend Adjustment

Spread Betting Dividend Adjustment
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Spread betting providers will make an adjustment on your account if you hold a position in a stock or index when it goes ex- dividend . At present UK equities and Indices go ex- dividend on Wednesday; therefore your account will be affected if you hold open positions in the relevant market at the close of the underlying exchange on Tuesday.
If you have a short spread bet position, you will need to pay a dividend adjustment on the ex- dividend date. This will be debited from your account and will be for 100% of the dividend . An example Let us look at a couple of examples of how this works out: WhiteElephant limited declares that it is paying a £0.10 dividend .
Those traders with short positions in spread bets are subject to paying the dividend adjustment , which is directly debited from their accounts on the ex- dividend date. Dividend adjustments are credited to long positions and debited from short positions held at the close of business the day before the ex- dividend date.
In a spread betting account you receive the dividend adjustment credit on the ex- dividend date rather than at a later payment date On short spread bet positions, the dividend amount is debited from (not credited to) your account for the benefit of those traders on the opposite (long) side of your short trade.
Spread betting companies tend to pay 80%-90% of the declared dividend , and they justify this (among other reasons) as a measure to prevent clients from pulling a tax-avoidance trick by selling an ordinary stock holding, taking out a spread bet to capture the dividend (without paying income tax), and then re-establishing the original stock position.
Dividend adjustments are credited to long spread betting and CFD positions and debited from short positions on the ex- dividend date. If you are long, you will be credited with 80% of the dividend and if you are short you will be charged 100% of the dividend . For example: If you were long £1 on a share, which is equivalent to owning 100 shares ...
Aug 8, 2022 Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 8th August 2022. These are projected dividends and likely to change. IG cannot be held responsible for any changes made. Dividends highlighted in red include a special dividend , therefore some or all of the amount will not be adjusted.
Jul 11, 2022 Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 11th July 2022. These are projected dividends and likely to change. IG cannot be held responsible for any changes made. Dividends highlighted in red include a special dividend , therefore some or all of the amount will not be adjusted.
So, overall, you don't lose or gain anything from the adjustment . There are no withholding taxes on short positions. Spread betting dividend adjustment : Let's say you hold a long spread betting position of £30/pt on Vodafone and Vodafone announces a 15p dividend . In this case, £450 would be credited to your spread betting account.
You are long £10 a point of the FTSE 100 DFB at 4:30pm when there is a dividend adjustment that takes 7.8 points off the index. Our FTSE 100 DFB price drops by 7.8 points, so your running profit and loss (P&L) is reduced by 7.8 x £10 = £78. We therefore credit your ledger with £78, to negate this drop in P&L.
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You are here: Home > Comparing Spread Betting Companies > Spread Bets Pay Partial dividends
You may or may not be aware that spread betting pays dividends on long equity and index positions held as daily rolling spread bets , so in this respect longer-term spread betting is a viable alternative to standard share dealing. However, the treatment of dividends on spread betting platforms differs from the treatment of dividends in regular brokerage accounts in three respects:
The third point is most interesting because it is specific to your choice of spread betting provider.
In some cases it is surprisingly (or perhaps not so surprisingly) difficult to find information on the dividend payout policy of particular spread betting companies. Unless you drop them an email to ask explicitly, the first time you will find out what % of the dividend you’ll get is when it is actually credited to your account. The dividend payout policy can change over time, but as a rough guide at the time of writing I understand the following to be true:
Rather than declaring an outright winner on this criterion, it is more a case of declaring who the winner isn’t . On this basis, the winner when it comes to the dividend payout policy isn’t the London Capital Group who only payout 80% of dividends. Ayondo pay the full dividend – you can’t have it much fairer than that can you? Some providers say that they pay the declared dividend less the 10% withdholding tax which they incur but to-date I haven’t found any proof of that – its more like providers retain the 10% – 20% as profit.
As a longer-term more investment-oriented position trader , dividend credits are more important to me than they would be to a short-term day trader or a medium-term swing trader . Traders who fall into those two categories might not care about the dividend payout policy and will judge a spread betting account on other criteria.To some extent, even I don’t care if I receive 80% or 90% of the declared dividend when other criteria are taken into account. For example: whereas the London Capital Group home brands fall down on the dividend payout criterion, they also happen to have the best support for guaranteed stop orders — which are also important to me.
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Dec 2, 2011 at 6:44 pm in Tips and Strategies by
Look back at my article Position Trading #7: Dividends and you will see that reader David Brown commented that he didn’t understand why dividends are paid out on UK 100 rolling spread bets but not on DAX 30 rolling spread bets. As well as answering that question here, it is worth re-iterating some of the other important points about dividends on spread bets.
Straight from the horse’s mouth at Capital Spreads comes the answer that the DAX30 index is a total return index , which means that the price of the instrument itself is adjusted rather than a separate dividend credit being made to the client’s account. Note that constituent stocks of the DAX 30 should have their dividends credited to the client’s spread betting account as normal just like the dividends from FTSE 100 stocks do.
The subject of how dividends may be accounted for on different instruments also brings us nicely to rolling spread bets vs. quarterly spread bets. As explained in an FAQs feature, quarterly spread bets already have any expected dividend priced in , so you won’t receive a separate dividend credit on the ex-dividend date as you would with a rolling spread bet.
Spread betting companies tend to pay 80%-90% of the declared dividend , and they justify this (among other reasons) as a measure to prevent clients from pulling a tax-avoidance trick by selling an ordinary stock holding, taking out a spread bet to capture the dividend (without paying income tax), and then re-establishing the original stock position.
Did you know that if you hold a short position in a stock or an index such as the UK 100, you have to pay the dividend (i.e. have an equivalent amount deducted from your account) on the ex-dividend date for the benefit of those who will receive it? That’s all fine and above board, but you will be interested to know that you pay 100% of the dividend on a short position compared with receiving 80%-90% of the dividend on a long position — so it may appear as though the spread betting company simply pockets the difference.
In the same spirit, note that whereas you pay overnight financing charges on long rolling spread bets, in theory you can receive financing charges on short positions, and again the spread betting company pockets the difference by paying out (for example) LIBOR -2% to short traders while taking in (for example) LIBOR + 2% from long traders. Notice that in this equation, a low LIBOR (at say 1%) minus 2% would yield a figure of -1% as the financing received by short traders; so in a low interest rate environment even short spread bettors will pay financing charges to hold their positions.
Unlike on an ordinary stock position where a dividend becomes payable if you hold the stock at the ex-dividend date, but is not paid until some weeks later, on a spread bet the dividend adjustment is made immediately at the ex-dividend date.
Many novice spread bettors and stock traders believe that they can get a free lunch by taking a position immediately before the ex-dividend date, banking (or becoming eligible for) the dividend, and then closing the position the next day. What they fail to realise, and it may be hard to spot when prices are fluctuating, is that when a company pays out a dividend of (let’s say) 5% its share price falls by the same 5% to reflect the fact that no new money has been created and subsequent purchasers of the stock will not receive the benefit of the dividend.
Since it is not possible to capture dividends in the short term — and if you found a way, the spread betting companies would try to stop you — the prospect of receiving dividends on spread bet positions will be of more interest to longer-term position traders and traditional investors.
While personally I would not “invest” solely for the income derived from high dividend yield while ignoring any adverse price action, it sometimes surprises me that more traditional investors do not practice their buy-and-hold techniques in the tax-friendly and commission-free environment of a spread betting account.
Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.
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When dividends are paid on a share in which you have a position, you will see this reflected by a ‘Dividend Adjustment’ on your account. Dividend adjustments are credited to long spread betting and CFD positions and debited from short positions on the ex-dividend date. If you are long, you will be credited with 80% of the dividend and if you are short you will be charged 100% of the dividend.
For example:
If you were long £1 on a share, which is equivalent to owning 100 shares, which went ex-dividend and the dividend was 10 cents per share, you would receive 10 cents x 100 shares x 80% = £8. If you were short by the same amount you would have been charged 10 pence x 100 shares x 100% = £10.
The same adjustment is applied to cash index positions to reflect constituent shares of the index going ex-dividend.

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Spread Betting Dividend Adjustment

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