Corporate Actions for Trading Assets

The most common corporate action is a dividend payment, i.e. when an issuing company shares profits with its shareholders. Here’s what you should keep in mind:

The ex-dividend date is the date after which the buyer can’t receive the next dividend payment .

On the ex-dividend date the price of stock, typically decreases by an amount equal to the dividend paid..

Stock indices tumble as well, when companies, pay the relevant stock dividends.

Companies offer stock and index CFDs. Any corporate action as to t underlying asset—stocks or stock indices—impacts CFDs as well.

This is what happens to your account when you trade stock CFDs:

If you have a long CFD position on the ex-dividend date, an amount equal to 80% of your dividend will be credited to your trading account.

If you have a short CFD position on the ex-dividend date, your trading account will lose an amount equal to your dividend

Corporate actions and index CFDs: How to calculate it the right way

Stock indices include various stocks. So, when the index drops due to the payment of stock dividends, we calculate it in the following manner. Let’s say you are long five lots on the S&P 500 index. Following the payment of stock dividends for this index, its price dropped by $0.35. The accrual in terms of long positions is 80% of a dividend amount, i.e., 0.8. This means that an amount equal to 5*0.35*0.8 = $1.4 will be credited to your account. In contrast, if you have a short position for the same index on the ex-dividend date, an amount equal to 5*0.35*1 = $1.75 will be debited from your account.

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