August 23, 2008

Day trading guide – Dividends are not to be sneezed at, but they do not represent a sufficient return to compensate for the risk of margin buying.

This is particularly true in times like the past year or so, when yields have been low. In the example we have been using, for instance, the $2 return on the $50 stock is 4 per cent. If the interest rate on your call loan is also 4 per cent, there is no dividend profit in the shares bought on margin. Should the return be $3, or 6 per cent, and the call-loan rate only 3 per cent, your prospects brighten a bit. Dividends on 225 shares would then total $675, while the interest would be only $202. Your net would be $473, or 175 per cent more than you could get from 90 shares.

Day trading guide – Dividends are not to be sneezed at, but they do not represent a sufficient return to compensate for the risk of margin buying.

Spread the Word!

Get Your FREE Trading Course (Value $197)!…

Browse