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HomeFutures & OptionsEver Wondered About Capturing Dividends While Trading Futures?

Ever Wondered About Capturing Dividends While Trading Futures?

The answer lies in leverage. With futures, you don't need a hefty sum to buy stocks upfront. Instead, you can gain exposure to a larger number of shares with just the initial margin

Unlocking Dividends with Futures Trading

Ever wondered about capturing dividends while trading futures? It’s a common question among market enthusiasts. Here, we delve into this intriguing topic to shed some light on the matter.

Understanding Dividend Dynamics

First off, let’s understand the deal with dividends. Typically, holding a long futures position doesn’t entitle you to dividends unless you can actually take delivery of the stock when the ex-dividend date is after the contract expires. But what if the ex-dividend date falls before the contract ends? Can you still snag those dividends?

Navigating the Dilemma 

Well, here’s the scoop. When you’re long on futures and the ex-dividend date hits before the contract wraps up, you’re in a bit of a pickle. To be eligible for those dividends, you’d usually have to buy and hold the shares. Then, you could nab the dividends when they’re paid out. But if you’re already locked into a futures position, you can’t directly receive those dividends. However, you can close your futures position before the ex-dividend date and use the proceeds to buy the stock.

Impact of Dividends on Futures Prices

Now, here’s where it gets interesting. If the dividends make up more than 2% of the stock’s market value, the futures price gets adjusted accordingly. Let’s say you’re eyeing a stock called ABC, which just announced a dividend of Rs 6 per share. The stock went ex-dividend on February 27. If the futures price was Rs 500 before the ex-dividend date, the adjusted futures price the next day would be Rs 494. In essence, holding onto futures won’t give you an edge here because the dividend amount gets factored into the futures price.

Strategies for Dividend Capture

But fear not, there’s a way to still cash in on those dividends. You can switch from a long futures position to a long stock position on the last day the stock trades cum-dividend. Since the futures price gets adjusted the next day, it’ll likely be trading at a discount to the spot price. And that discount? It’s usually close to the dividend amount.

Leveraging Futures for Capital Efficiency

Now, you might be wondering, why bother with futures in the first place? The answer lies in leverage. With futures, you don’t need a hefty sum to buy stocks upfront. Instead, you can gain exposure to a larger number of shares with just the initial margin and mark-to-market margin. This frees up your capital to explore other opportunities in the derivatives market.


So, there you have it. While capturing dividends with futures requires some maneuvering, it’s all about leveraging your resources to make the most of your trades. Just remember to weigh the pros and cons before diving in, and you’ll be on your way to maximizing your returns in the market. 

Disclaimer: This blog is intended solely for educational purposes. The securities mentioned are for illustrative purposes only and not recommendations. The content is sourced from various secondary sources on the internet and is subject to change. Please consult with a financial expert before making any related decisions.
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