Dividend Arbitrage

This is an arbitrage strategy whereby the options trader buys both the stock and the equivalent number of put options before ex-dividend and wait to collect the dividend before exercising his put.


XYZ stock is trading at $90 and is paying $2 in dividend tomorrow. A put with a striking price of $100 is selling for $11. The options trader can enter a riskless dividend arbitrage by purchasing both the stock for $9000 and the put for $1100 for a total of $10100.

On ex-dividend, he collects $200 in the form of dividends and exercises his put to sell his stock for $10000, bringing in a total of $10200. Since his initial investment is only $10100, he earns $100 in zero risk profits.

Dividend Capturing using Covered Writes

Another way to collect dividends is by using covered calls. This strategy is detailed in this article.

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