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Dividends for Spot CFDs

Dividends for Spot CFDs

A dividend can be explained as distribution of company’s earnings to its shareholders. Spot CFD trading is subject to possible dividend adjustments. The dividend adjustment date corresponds to the underlying share’s ex-dividend date. Before this date, you must own the share to receive dividend.

  • Dividend adjustments are calculated for all open Spot CFD positions.
  • Credit or deduction depends on the direction of your open positions. Positive adjustment is applied to long positions while negative adjustment is applied to short positions.
  • Dividend is an incentive and a form of compensation for the shareholder and they are normally paid out quarterly or semi-annually.

Ex-dividend Date

The ex-dividend date is the day on which the stock no longer includes an entitlement to the upcoming dividend payment. It’s usually one business day before the dividend is paid out by the company.

Clients opening a position on the ex-dividend date will not be entitled to, or are required to pay, the dividend on their positions.

The value of the stock will fall on this date because of the dividend payout. The adjustment will be made at the open of the index on the ex-dividend date. This price drop will affect the profit and loss (P/L) of the open position. To compensate this, there will be credit or deduction.

Note that clients can neither profit nor lose from these price movements since these are scheduled public events. It is a zero sum situation where any P/L change has a corresponding debit or credit to compensate.

Dividend Adjustment :

If you have a long position, your P/L will be negatively affected. Therefore, you will receive a credit in the same amount as the dividend adjustment.

If you have a short position, your P/L will be positively affected. Therefore you will receive a debit in the same amount as the dividend adjustment.

Example: You are long 1 lot (£10 a point) of UK100 (FTSE 100 Index) when there is a dividend adjustment, which will take 5.5 points off the index. Consequently, UK100 price will drop by 5.5 points, so your running P/L will be reduced by 5.5 x £10 = £55 ≈ $74

Disclaimer : CDO Markets does not decide on any dividend adjustment. The amount is set by our liquidity providers. CDO Markets will give its best efforts to notify the clients about upcoming dividend adjustments. But it is the responsibility of the clients to follow the instruments for dividend payments. Dividend credit / deduction will be applied to your account as they occur in the market.

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