Futures can be helpful for dividends capturing

F&O
1

Just a doubt
What happens if i sell futures 1 lot and same amount of stocks if i buy in delivery (note;- the stock which i’m talking about have the highest Dividend Yeild Stocks)

I will do this to one which have not announced dividend but about to announce in a week or so…

2

You will receive the dividends for holding the shares. F&O are contracts and you don’t get dividends for holding these. To know what effects Corporate Actions have on F&O, you can check out this support article.

2 Likes
3

My exact doubt is that if i buy
ITC 3200 stocks at 209.30 (cmp)
& SELL ITC NOV FUT at 211.70 (cmp)
Today at the same time itself.

And next week they have annouced Dividends now as @nithin kamath sir told
The Fut Price should decrease & Stock price should increase eventually

From either sides will i be profitable ,thats my exact question

4

The Futures price won’t drop on ex-dividend date, it’ll be adjusted. The adjustment is done such a way that the value of the position of the market participants, on the cum and ex-dates for the corporate action, shall continue to remain the same as far as possible.

So on ex-dividend date when the spot price drops, your Futures position will neither be in loss or profit. Also, check out this post for more information: Adjustment of Futures and Options contracts in ITC Limited

5
Futures are not stocks; they are derivatives, with respective stocks, commodities, and currency as their underlying asset. So, futures per se cannot help you directly with dividends. Instead, you need to purchase a stock from the equity market for dividends capture.

However, there is a scenario where futures or even options can help you hedge the risk and protect your market downside on the ex-dividend date. Futures are other derivatives that can help you in hedging your risks and make a profit through speculation.

When you buy a stock for dividend capture, you need to buy it as soon as the dividend is announced as the price starts rising sharply. However, if you are a short term trader, you also need to sell it on or after the ex-date (ex-dividend date).

The concept of ex-dividend dates comes from the fact that delivery of shares takes T+2 days, which means buying a share before the ex-date would keep your name in the company’s record on the record date. Thus, the record date for dividends is 2 days after the ex-dividend date.

On the day of the ex-date, the stock prices rising after the dividend was announced started decreasing. So, if you cannot sell it in time, you might incur losses that might even cut into your dividend incomes. So, this is where futures contracts come into play.

Using a futures contract, you can hedge a stock position to lower this or eliminate the loss in the equity segment.