It’s known as»dividend catch». This strategy is implemented when a dealer buys a stock just prior to the ex-dividend date, so he or she’ll be a shareholder of record on the record date, and will get the dividend. Since the stock falls by the amount of the dividend on the ex-dividend date, the plan calls for the dealer to then await the stock to return to the cost where he or she purchased it before the ex-dividend date. At this time, the inventory is sold for a rest even commerce. Thus the dividend is received, or captured by the dealer with no additional exposure to the movement in the stock price after it’s sold for a break even.
When trying to execute this brief term trading strategy, start looking for stocks with higher volume, and a comparatively large dividend payment. Higher volume eases exiting the position without affecting the stock price. The high volatility allows for more profit potential. The use of a discount broker can also be beneficial because it will decrease the total cost of this transaction, and increase the yield of implementing the plan.
Please be aware that this is an aggressive trading strategy, and not suitable for everybody. Study the Idea. «Paper trading», or practicing the strategy before using real money is always a prudent step when implementing new approaches into your portfolio of trading tools.