Can you short a stock before the ex-div. date to make a profit?
When you short a stock and the stock goes ex-div. you have to pay out an amount equal to the dividend. So in your example, GG would short the stock at $10.00, buy back at $9.00 and be charged $1.00 for the dividend. Net effect $0.00. I am relative newbie in the financial market trading and as I understand it, the response from Victor is accurate in respect of trading CFD contracts. However, there is also the option to 'trade' through a financial spread betting platform which as its name suggests is purely a bet based upon the price of the underlying stock/asset. As such, I believe that your theory to short a stock just prior to its ex-dividend date may be worth investigating further... Apart from that, it's worthwhile mentioning that financial spread betting is officially recognised by HMRC as gambling and therefore not currently [2015/16] subject to capital gains tax. This info is given in good faith and must not be relied upon when making any investment and/or trading decision(s). I hope this helps you make a fortune - if it does; then please remember me!
Yes you can do that and it it wise to do so. However, you should make sure that the general trend of the stock is upwards and you buy during a trought in the uptrend. So basically if the stock is making higher highs and higher lows on the daily or weekly charts, then you would want to buy around one of the higher lows before the ex-dividend date. If the stock is making lower lows and lower highs, then it is in a downtrend, so never buy in this instance. It is better to miss out on a dividend of $1 rather than to buy just for this $1 dividend and lose $5 or more when the price continues to drop further. I see another way of looking at this that hasn't been addressed yet. By offering the discount, the company is attempting to change your behavior into doing something irrational, that benefits them at your expense. The company hopes for one (or more) of the following psychological effects to happen to you: The proper thing to do, if you have enough capital to prevent margin calls, it to short-sell the stock at the same instant the price is set, thus locking in the profit. Eventually you can take possession of the shares and deliver them to offset the short -- hopefully before you get a margin call from the stock dropping. This is a Short Diagonal Calender Put Spread Generally, you're writing that long dated one at the money, and buying the short dated one out of the money.  The maximum amount that can be made is if the stock breaks out strongly to the upside, and you keep the upfront credit minus whatever small amount it took to buy the April puts back.  You can also make money if it breaks strongly to the downside, but only if the credit when you opened your positions was more than $10. Example:  Now say the stock falls to $500 by the time of that march expiration. You'd make $90/share on the march put, and lose $100/share on the April put (or a little more; but that deep in the money, there won't be much premium on it). That's a loss of $10/share, or -$1000. So: I make a point of pointing this out because in that article I linked to the fact that your upfront credit needs to be greater than the strike spread in order to profit to the downside is not clearly mentioned. At the higher level - yes. The value of an OTM (out of the money) option is pure time value. It's certainly possible that when the stock price gets close to that strike, the value of that option may very well offer you a chance to sell at a profit. Look at any OTM strike bid/ask and see if you can find the contract low for that option. Most will show that there was an opportunity to buy it lower at some point in the past.  Your trade. Ask is meaningless when you own an option. A thinly traded one can be bid $0 /ask $0.50. What is the bid on yours? Stating poor estimates in advance will lower your share price to compensate for thge extras boost it gets later ... And may run afoul of stock manipulation laws. More pain than gain likely. Suppose the price didn't drop on the ex-dividend date. Then people wanting to make a quick return on their money would buy shares the day before, collect the dividend, and then sell them on the ex-dividend date. But all those people trying to buy on the day before would push the price up, and they would push the price down trying to sell on the date. The point of short-selling as a separate instrument is that you can you do it when you can't sell the underlying asset... usually because you don't actually own any of it and in fact believe that it will go down. Shorting allows you to profit from a falling price. Another (non-speculative) possibility is that you don't have the underlying asset right now (and thus can't sell it) but will get it at a certain point in the future, e.g. because it's bonds that you've used to guarantee a loan... or grain that's still growing on your fields. "The most fundamental answer is that when you short a stock (or an ETF), you short a specific number of shares on a specific day, and you probably don't adjust this much as the price wobbles goes up and down. But an inverse fund is not tied to a specific start date, like your own transaction is.  It adjusts on an ongoing basis to maintain its full specified leverage at all times.  If the underlying index goes up, it has to effectively ""buy in"" because its collateral is no longer sufficient to support its open position.  On the other hand, if the underlying index goes down, that frees up collateral which is used to effectively short-sell more of the underlying.  So by design it will buy high and sell low, and so any volatility will pump money out of the fund. I say ""effectively"" because inverse funds use derivatives and contracts, rather than actually shorting the underlying security.   Which brings up the less fundamental issue.  These derivatives and contracts are relatively opaque; the counter-parties are in it for their own benefit, not yours; and the people who run the fund get their expenses regardless of how you do, and they are hard for you to monitor.  This is a hazardous combination." While my margin is not nearly as good as yours, I sell out early.  I generally think it's a bad idea to hold any single stock, as they can vary wildly in value.  However, as you mention, it's advantageous to hold for one year.  Read more about Capital Gains Taxes here and here. With a short position you make your money (profit) when you buy the stocks back to close the position at a lower price than what you bought them at. As short selling is classed as speculation and not investing and you at no time own any actual assets, you cannot donate any short possition to charity. If you did want to avoid paying tax on the profits you could donate the proceeds of the profits after closing the position and thus get a tax deduction equal to the profits you made. But that raises a new and more important question, why are you trading in the first place if you are afraid to make profits in case you have to pay tax on those profits? The point is that the bid and ask prices dictate what you can buy and sell at (at market, at least), and the difference between the two, or spread, contributes implicitly to your gains or losses. For example, say your $1 stock actually had a bid of $0.90 and an ask of $1.10; i.e. say that $1 was the last price. You would have to buy the stock at the ask price of $1.10, but now you can only sell that stock at the bid price of $0.90. Thus, you would need to make at least that $0.20 spread before you can make a profit. Shorting penny stocks is very risky.  For example, read this investopedia article, which explains some of the problems.  In general: If you have some sort of method for perfectly identifying Pump and Dump schemes, it's possible you could make money if you time things right, but that timing is going to be very difficult to identify. This is the bird's eye view of how shorting works: When you place an order to sell a stock short, your broker attempts to grab the desired number of shares from any accounts of its other customers and makes them available for you to sell. If no other customers own shares of this stock, then generally you are out of luck (It is more complicated like that in practice, but this is just an overview).    Your odds are better if the particular stock has a large float (i.e. a large number of shares that are actually available for trading) and its short ratio is low (which means relatively few shares   are currently being sold short). Also, a large brokerage may be more likely to have access to the shares than a small niche-market broker.   The example you've given, Angie's List (ANGI) is a $600M small-cap with a comparatively low float, and though I haven't been able to glean the short ratio, it appears that a lot of investors are bearish on this stock and probably already had the same idea to short it.  There is really no way to find out if a specific broker has shares in inventory available for shorting, short of (forgive the pun) checking directly with the broker. "Not minutes, but hours.  The ""ex-dividend"" date is the deadline for acquiring a stock to receive a dividend. If you hold a stock at the beginning of this day, you will receive the dividend. So you could buy a stock right at the end of the day on the day before the ex-dividend date, and sell it the next day (on the ex-dividend date), and you would get your dividend. See this page from the SEC for more information.  The problem with this strategy, however, is that the value of the stock typically drops by the same amount as the dividend on that day. If you take a look at the historical price of the stock you are interested in, you'll see this. Of course, it makes sense why: a seller knows that selling before  the date results in a loss of the dividend, so they want a higher price to compensate. Likewise, a buyer on or after the date knows that the dividend is already gone, so they want to pay a lower price." "If we take only the title of the question ""can the CEO short the stock"": It was probably different before Enron, but nowadays a CEO can only make planned trades, that is trades that are registered a very long time before, and that cannot be avoided once registered. So the CEO can say ""I sell 100,000 shares in exactly six months time"". Then in six months time, the CEO can and must sell the shares. Anything else will get him into trouble with the SEC quite automatically. I don't know if shorting a stock or buying options can be done that way at all. So it's possible only in the sense of ""it's possible, but you'll be in deep trouble"".  Selling shares or exercising share options may indicate that the company's business is in trouble. If the sale makes that impression and everyone else starts selling because the CEO sold his shares, then the CEO may be in trouble with the board of directors. Such a sale would be totally legal (if announced long time ahead), but just a bad move if it makes the company look bad. Shorting sales is much worse in that respect. If the CEO wants to buy a new car, he may have to sell some shares (there are people paid almost only in share options), no matter where the share price is going. But shorting shares means that you most definitely think the share price is going to drop. You're betting your money on it. That would tend to get a CEO fired, even if it was legal."