Today, you’ll learn how to buy stocks after ex-dividend date.
- What is ex-dividend date?
- Why stocks recover after the ex-date?
- Stocks real value and recovery
Stock dividend play is famous among traders around the world. Stocks normally loss their value at the ex-date. The value is usually lesser than its dividend declared.
Traders often disposes their stock positions at the ex-date because stocks lose part of their value during this day. Often, the decrease in the stocks value is equivalent to its dividend declared.
Do stock prices actually recover their value after dropping? When should traders increase their stock positions after the ex-date?
Buying stocks after the ex-date is not famous, yet it is one of the best thing anyone can do. Stocks generally recover their value after at the ex-date.
The question is when does a stock recover its value?
Is there an edge in the wake of the ex-date?
There is an edge, yet most traders do not know it.
Large brokers usually increase their stocks positions weeks after the ex-date to position themselves and to provide liquidity in the stock market.
If stocks do not recover their value after ex-date, the stock market ceases to exist because investors will stop their investments.
Isn’t it strange that most brokers kept their secret from people?
What is Ex-dividend Date?
According to Investopedia, the ex-date determines whether the buyer or seller receives the dividend. (source)
To explain, buyers at the ex-date will not receive their dividends at the payment date, so the stock price losses its value to compensate the decline in value.
Who buys at the ex-date?
All the people who buy at the ex-date are not fools. Most of them do their homework, and they already know their strategy.
The stock market is designed to increase its value for the investors. There are more bull markets than bear markets if one studies his history.
How can a trader use this knowledge to his trading?
Why stocks Recover after Ex-dividend Date
When a company pays its dividend, its market value decreases also to compensate the loss in value.
The market often corrects its pricing after the ex-date to reflect the real value of a stock.
Value investors invest their dividends and large institutions provide liquidity, so the stock ultimately recovers its value.
If the stock is in an uptrend, its price generally recovers after the ex-date.
Lee KCM Research, a research analyst at Seeking Alpha, investigated the price anomaly of stocks after their ex-dates.
They concluded that stocks prices generally recover their value after ex-date. (source)
The recovery amount increases its value the longer its holding period from one to four weeks.
Most of the stocks declined in the first week and recovered their losses thereafter.
American Express lost 46.61% of its value in the first week and recovered 86.65% of its value thereafter.
This implies that traders can increase their stock holdings two weeks after the ex-date.
Johndeo also noticed that most profitable brokers provide its liquidity to the stock market two to four weeks after the ex-date.
He did his study by tracking broker activities without cross trades to get the actual transactions of the broker.
Cross trades are transactions within a broker and his clients.
If JP Morgan buys and sells from other brokers, it is not considered a cross trade.
This is very important.
Traders must get this data if he wants to be successful in trading. He can also use a stock dividend calendar to apply the strategy below.
Buying stock after ex-date
- Get a stock dividend calendar
- Determine the trend
- Get the average volume
- Buy one to two weeks after the ex-date
1. Get a stock dividend calendar
All stock markets have their own dividend calendar. Traders can actually use NASDAQ’s website to look for trading opportunities.
2. Determine the trend
Traders should only buy its stocks if it is in an uptrend. Applying technical analysis is also important to his success.
He should filter his traders every day.
3. Get the average volume
This video shows why stocks volume is important.
4. Buy one to two weeks after the ex-date
Lastly, buy one to two weeks after the ex-date at support levels or at break of resistance.