Hi All, I got a question about paying dividend when short selling a stock. For example, i have short sell the ABC company share on Jan 01. and my short position would be closed on March 01. On Feb 01, ABC company paid dividend to its shareholders. Should I pay the dividend to back to the broker at once on Feb 01 or pay when my position closed on March 01? Thanks. Cheers, Victor
You will have to pay it on Feb.1
Your broker would probably be happy to lend it to you as long as you like, but you start paying interest on 2/1
JDV, what interest? He didn’t say he was borrowing any money.
fule.
Yep, when you short something, you owe the lender any dividends or coupons that they would have gotten if they hadn’t lent you the security. Joey said something that I didn’t know but makes sense: you can pay the dividend with money you borrow from the broker, then pay it back whenever it makes sense for you (or until your broker gets nervous), but you’ll pay interest from the time you borrowed it, which is basically when the payment was due.
In that case, you pay interest for anything you borrow, what does that have to do with shorting specifically? If you have enough funds in your account (most likely the case given that dividend payment is relatively very small), there is no interest involved.
are you only eligible to pay the dividend if you went short before the ex date?