Dividend adjustment

[Guest moorejo]

On my trading statement I keep seeing this statement- Correction Dividend FTSE 100- with different values = and -. Can someone help explain this please?

[CharlotteIG]

Hey, thanks for your post. 

The below information was taken from our website. 

Constituent stocks of an index will periodically pay dividends to shareholders. When they do, this impacts the overall value of the index causing it to drop by a certain amount.

It’s important to remember that leveraged index traders can neither profit nor lose from these price movements, as they’re scheduled public events. Were a trader able to profit from these movements, they’d simply place a large short position just before the adjustment and close out just after, locking in the drop in the value. 

If you have an open position through a dividend adjustment, we’ll ensure that there is no material impact on you by either crediting or debiting your ledger with the exact amount you have incurred as additional running loss/profit due to the dividend adjustment.

Let’s look at some examples: 

You are long £10 a point of the FTSE 100 DFB at 4:30pm when there is a dividend adjustment that takes 7.8 points off the index. Our FTSE 100 DFB price drops by 7.8 points, so your running profit and loss (P&L) is reduced by 7.8 x £10 = £78. We therefore credit your ledger with £78, to negate this drop in P&L.

Now let’s say you’re short two standard lots of Wall Street Cash at 9pm when there is a dividend adjustment of 2.9 points. Our Wall Street Cash price drops by 2.9 points, so your running P&L is increased by 2.9 x 2 x $10 = $58. We therefore debit your ledger with $58, to negate this rise in P&L.

You can see the expected dividend adjustments on our weekly blogs which get advertised every Monday on 'Our picks'. If you follow the link below you can find this weeks adjustments as well as a video that explains dividend adjustments further.