Instalment Div Strip

[crashy]

NABIOJ was a $30 Nov 2004 instalment warrant.

Before NAB paid its 83c div on Nov 15, this warrant was trading at 83c (they werent silly enough to sell it any lower).

This provided a risk free trade.

You could have bought the warrant for 83c, held overnight and collected 83c cash div plus 35.5c franking credit (total 118.5c).

Once ex-div, the warrant was worthless, although a sharp NAB rally towards $30 would have created some value.

So you would have made a 43% return on your money, plus had free upside exposure.

Be on the lookout for short dated instalment warrants (trading at cash div value) around cum-div time.......

 

[RichKid]

Hi Crashy,
Thanks for pointing that out and for sharing, I'm still not into these div strategies but I'm becoming really interested with people like you and Rozella showing the benefits of dividend plays.
I thought there were other costs associated with instalment warrants so didn't hold em but for short term plays around dividend time it may be a goer for me, hope I get this right, a bit more complicated than my usual trades. Might start looking at it early next year.

i'm currently in GLI after it went ex-div, this is not a tip but it may help you and guys like Rozella who know what they're doing. I bought into GLI recently for a longer term trade. Might mention this on Rozella's div thread...

 

[Fab]

I am new to installment warrant but would like to invest in one related to ZFX.
My view is I want to invest in one that expire around april next year so that give me time to get the 0.70 cents dividend due in october and hopefully get some benefit of a possible share rally in Nov/ December / Jan.

ZFX closed at 12.14 on the 09/09/06


ZFXIOI Call 26/04/07 5.750 1 0.000 0.000 6.700

ZFXIZ7 Call 27/04/07 10.000 1 0.000 0.000 4.300

ZFXIZ8 Call 27/04/07 11.000 1 0.000 0.000 3.730


ZFXIOI is the installment warrant that appears to me the most attractive even thought it is priced at 6.70.
When dividend date comes if I buy 500 ZFXIOI does that mean I will get the dividend credited to my account for the equivalent of 500 ZFX shares ( ratio being 1/1) . ZFXIZ7 and ZFXIZ8 look good but the premium to pay appears a bit to expensive to me.
Is their anything I am over looking in the way I am approaching this installment warrant. Please let me know your feedback .

Cheers

 

[Fab]

I am wondering if buying an installment warrant few days before the dividend is due and then sell it few days after is a good strategy ?? Just to get the dividend bearing in mind that the total dividend paid for the financial year has to be below the $5000 .
My other question is what happen to an installment warrant after the last dividend of is paid , I suppose there would not be any reason for keeping it much longer therefore I am expecting its value to drop . Is that correct?
I am new to installment warrant and I am trying to make sense of them.

Thanks for your help

 

[Fab]

I am still trying to fully understand the best strategy in using installment warrant dividend stripping therefore I got the documentation from Macquarie bank.
One trading tip the say in their documentation is:
" When an American style warrant is deep in the money and a dividend is due on the underlying shares before the expiry date , the holder may be better off exercising the warrant early to receive the dividend. If this is the case then the warrant may actually fall in value when the underlying shares goes ex - dividend"

Can anyone explain to me this statement . First I am not to share why this apply only to American style warrant and only when the warrant is deep in the money. I guess is what I want to avoid is buying an installment warrant that will be worth nothing after the dividend is paid on the share.
I am currently looking at buying a ZFX installment warrant before of the large dividend to be paid by ZFX.

Thanks for your help