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The stock that forms the part of the index will have a weight in the index, i.e. how much the movement of that stock affects the movement of the index.
When a dividend goes ex, this will trigger a 'drop point' on the index. This is calculated from the value of the dividend, the weight in the index and the fx rate, if the stock is priced in a different currency from the index.
When a dividend goes ex, the price of the underlying stock will open that morning lower by the amount of the dividend. This usually doesn't have a huge effect as the percentage change is well within day trading movements of a stock anyhow. The same applies for the level of an index move - the index will open lower by the drop point amount, but will generally be negligible on the movements of intra-day trading anyhow.
You may have to be careful with special dividends, as they can be a higher percentage of the stock trading price, which may actually cause a noticeable drop in intra day trading price. They can also affect index levels.
Dividends have a different effect on options though, but generally the price of a basic call / put would already have been adjusted before the ex-date. If you have a structured product, for example a vertical spread consisting of 2 long and 2 short options, then your position won't be affected as what you lose on one you will make on the other.
If you have a time spread where your position is dependant on the stock price staying where it is, then you need to do further analysis on your Greeks and how it will affect option price.
Thanks.
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∙ 8y ago
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Are dividends paid on treasury stock?
cash dividends are not paid on treasury stock, but what about stock dividends? I would think stock dividends would apply to treasury shares, but would like to know for sure. Also, I assume stock splits apply to treasury shares and would like this verified.
Do stock dividends always pay monthly?
No, stock does not always pay dividends at all much less monthly.
Does cashing on dividends affect your principal?
Cashing in your dividends should not affect the principal amount you put into it.
How is common stock dividends distributable classified?
Common stock dividends distributable is an equity account and it has a normal credit balance. It is added to capital stock on the balance sheet.
How can stock dividends be paid?
Stock dividends are usually paid by check. Rarely, they can be applied to purchasing more stock or property. They are usually paid either quarterly or annually.
How do cash dividends affect stockholders equity and how would a stock dividend affect stockholders equity?
They do not.
What are the four major types of transactions that affect equity?
revenue expenses dividends and common stock
Which dividends do not reduce stockholders' equity?
stock dividends
Are dividends paid on treasury stock?
cash dividends are not paid on treasury stock, but what about stock dividends? I would think stock dividends would apply to treasury shares, but would like to know for sure. Also, I assume stock splits apply to treasury shares and would like this verified.
Do stock dividends always pay monthly?
No, stock does not always pay dividends at all much less monthly.
What type of stock indexes are there?
There are indexes that cut across industries; there are indexes that deal with one industry only. Indexes include varying numbers of stocks.
Why are large stock dividends accounted at par value?
ALL _______ Dividends increase the supply of stock, which decreases the price Large stock dividends have a significant effect on the price of stock, so the current market value can NOT be used to value large stock dividends – and the only remaining choice is PAR or STATED VALUE Small stock dividends have only a minor effect on prices, so the current stock price is still used to value the stock dividend Reduction in the price due to an increase in numbers of shares is called “dilution
Is dividends payable in stock a liability?
No,
How many stock indexes are there in India?
108
Does cashing on dividends affect your principal?
Cashing in your dividends should not affect the principal amount you put into it.
How is common stock dividends distributable classified?
Common stock dividends distributable is an equity account and it has a normal credit balance. It is added to capital stock on the balance sheet.
How can stock dividends be paid?
Stock dividends are usually paid by check. Rarely, they can be applied to purchasing more stock or property. They are usually paid either quarterly or annually.
