What is a dividend adjustment?
Dividends are part of the assets that a listed company distributes to shareholders from earnings, usually quarterly or semi-annually, in cash payments to return shareholders and attract more people to invest in the company.
In CFD trading, since investors do not actually hold stocks, Doo Prime will adjust dividends to ensure that customers do not generate unreasonable profits and losses due to price changes on the ex-dividend date.
Please note that the actual dividend adjustment amount depends on the parameters set by Doo Prime’s liquidity provider and is revised based on changes in the liquidity provider.
Dividend Adjustment Formula
Dividend adjustments are generally calculated on the ex-dividend date based on dividend announcements made by the listed companies. The investor’s open positions, and the CFDs on the shares held by investors before the ex-dividend date will be affected by this. The dividend adjustment amount for the long position will be credited to the account, while the dividend adjustment amount for the short position will be deducted from the account.
There is no fixed ex-dividend date for stock index trading products. Should any constituent pay dividends, which in turn affects the price of the stock index, Doo Prime will also arrange dividend adjustments, and deduct 1% of the dividend adjustment amount as a handling fee.
As long as the client holds stock indices after 00:05 (platform time) on a specific ex-dividend date, the dividend adjustment amount can be received or paid. If the position is closed before 00:05 on the ex-dividend date, it will not be affected.
The calculation method is as such:
Dividend per share × contract size per lot × volume (lots) = dividend adjustment amount
Dividend Adjustments Examples
1) Individual Stocks
Suppose you have an open position, with 1 lot of Apple shares on the ex-dividend date. According to the contract specifications, 1 lot is equivalent to 100 contracts, and the dividend per share on May 7, 2021 is calculated as USD0.2
a) If you have a long position, the dividend adjustment amount will be positive:
USD0.2 × 100 contracts × 1 lot = USD20
b) If you have a short position, the dividend adjustment amount will be negative:
-USD0.2 × 100 contracts × 1 lot = -USD20
2) Stock indices
Suppose you have an open position in S&P 500 Spot Index on the ex-dividend date. According to the contract specifications, 1 lot is equivalent to 10 contracts. The dividend per share on June 18, 2021 is calculated as USD2.49
a) If you have a long position, the dividend adjustment amount will be positive:
USD2.49 × 10 contracts × 1 lot = USD24.9
b) If you have a short position, the dividend adjustment amount will be negative:
-USD2.49 × 10 contracts × 1 lot = -USD24.9
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