Questions from a stock market beginner

[Tom32]

Rang Macquarie this morning to confirm. Only 1 brokerage per order which they levy on the first trade made under the order so the 20 odd dollars they took yesterday will be the only 20dollars they will levy on this order.

They will not levy another unless I change the order.

It seems the definition of trade and order are different and if I had read the fine print with that understanding i would have been able to tell this from the t and c.

 

[VeryGreen]

Franked Dividens.

Hello,
I think this is the logical place to post my question.

A bloke I used to work with once told me that he started to really do well once he found out about how well franked dividends could work for you.

Well, being a beginner and very green... I thought I would try and do some research but I still don't understand the point. I can not see how they could help someone build wealth any more than if they were not franked and I was hoping someone could explain it to me.

Below is how I see it which is probably wrong so if anyone has the time could they please set me strait?

Franked:
Company A makes $100 profit per share and distributes that to the shareholders after paying 30% company tax fully franked. So as I understand it share holder gets $70/share with a tax credit of $30
Share holder is in a 40% tax bracket.
Share holder pays 40% of the $70+$30 profit ($40)
Come tax time its calculated that the company already paid $30 so the shareholder just has to pay $10
$70-$10=$60

Unfranked:
As above but no tax is paid by company, $100/share is distributed to the shareholders
Share holder pays 40%
100-40=$60

I'm obviously missing something here. I read somewhere that if you have a lower income you would actually get a partial refund from the tax department but even that makes no sense in my little mixed up head. From what I have read and twisted around in my knogen it looks like the refund your getting is equal to what you would have got if the div was unfranked?

If I ever make money from shares outside of super, I think it will be the biggest fluke.

 

[BALIBOY57]

newbie

i have share that i want to cash in is there someone that can help me do this or how do i go bought this

 

[AlexFyfe]

Hey Guys

Newbie to stock trading but not to investing and forex trading. I have a question based around what happens to stock prices when the dividend of that stock is paid. I have read that the price will generally drop by the amount of the dividend, is this mostly the case? If so why wouldn't people short sell the stock or buy put options on the stock just before the dividend is to be released and then sell their position when it has depreciated by the dividend amount?

Any advice on this matter would be a great help.

 

[captain black]

I have read that the price will generally drop by the amount of the dividend, is this mostly the case?

Generally speaking, yes.

If so why wouldn't people short sell the stock or buy put options on the stock just before the dividend is to be released and then sell their position when it has depreciated by the dividend amount?

I don't know anything about options but in the case of CFD's if you hold a short position the amount of the dividend is deducted so there would be no net gain.

 

[AlexFyfe]

Generally speaking, yes.



I don't know anything about options but in the case of CFD's if you hold a short position the amount of the dividend is deducted so there would be no net gain.

Ah yes, if you are short on the stock, I believe you owe the dividend. Options could possibly be a way of making profit out of these predictable price moves. Something I will look into.

Thanks for your help

 

[cynic]

Ah yes, if you are short on the stock, I believe you owe the dividend. Options could possibly be a way of making profit out of these predictable price moves. Something I will look into.

Thanks for your help

The more predictable scenarios are usually more challenging for the simple reason that your competitors have the same advantage, namely the predictability of the situation.

 

[Flinky]

I have a question not sure if could do with a new thread, but the yahoo finance historical data has something called "adjusted close". From what I understand, that's stuff like dividends and splits accounted for.

Does the old data get updated or something? Like the Telstra stock has it in the $1 mark a few years ago which is half the price of the actual stock.

Is that calculated on the day or does a new dividend change every single old adjusted stock price?

 

[ryan11]

Why always there exists a difference between bid and ask ?
What are the factors that determine spread and on what currency pairs spread is minimum ?

 

[kefa]

Is that calculated on the day or does a new dividend change every single old adjusted stock price?

Different data vendors have different ways of doing this but Yahoo finance will basically subtract every new dividend from the historical price so you get a "smooth" price series. So yes it will adjust historical data every time there is a new dividend. For big paying dividend stocks this process can result in prices which are very low that never really occurred.

 

[cynic]

Why always there exists a difference between bid and ask ?...

What do you envisage happening when the bid and ask are the same?

Would a trade not ensue?

Would both parties need to continue bidding/asking after having completed their trade?

As for your question regarding spreads on currency pairs, it might be better to spend time observing the major pairs in order to gain an appreciation of typical spreads and their behaviour. A general rule of thumb (when seeking tighter market spreads) might be to focus on the more highly liquid markets.

 

[aik]

I was wondering if I bought $500 of wow stock at $24 per share and the shares went up 0.54 % today what amount of profit would i make i know it sounds like a stupid question but just starting to learn about stock market

 

[cynic]

I was wondering if I bought $500 of wow stock at $24 per share and the shares went up 0.54 % today what amount of profit would i make i know it sounds like a stupid question but just starting to learn about stock market

Unless your brokerage costs are less than $2.70 (i.e. 500 × 0.0054) , you wouldn't be in profit.

 

[lockscombi]

Hey everyone

I have read in a book that the optimal volume you want to see upon a breakout is usually at least 2x the average volume (Insider trading).

It dawned on me today that with the ASX, it would be tiny compared to the American market. Does that mean that a visual indicator of volume would not apply here in the Australian market?

Do we still see those kind of 2x, 3x even 4x type volumes, or is it more like 1.5x etc etc

Cheers

 

[Gringotts Bank]

Hey everyone

I have read in a book that the optimal volume you want to see upon a breakout is usually at least 2x the average volume (Insider trading).

It dawned on me today that with the ASX, it would be tiny compared to the American market. Does that mean that a visual indicator of volume would not apply here in the Australian market?

Do we still see those kind of 2x, 3x even 4x type volumes, or is it more like 1.5x etc etc

Cheers

I don't think it makes much difference. If anything, a lower volume breakout is preferable.

from Bulkowski's http://thepatternsite.com/VolumeStudy.html

Volume Study: Closing Position

After a high volume breakout, the move isn't much better than after a low volume breakout, failures increase (many are taught to avoid a low volume breakout), and the likelihood of a throwback or pullback triples. Throwbacks or pullbacks rob the stock of momentum and performance suffers.

 

[CanOz]

I reckon that one reason higher volume breakouts might fail is due to the degree of shorts that were squeezed out. This may look good but if there is no follow through then it was just that, short covering.

Now a throwback or retest that gets some volume, that would be interesting to test.

 

[lockscombi]

Thank you, that's very interesting

 

[CanOz]

Thank you, that's very interesting

What that might look like on a daily chart could be a number of things, but a narrow ranging bar or candle at the retest level with above average volume would get my attention.

 

[tajid]

I've read how after a stock pays out dividend its share price goes down by the dividend amount, is that true? If so then dividend doesn't sound that favourable.

 

[tajid]

Can't seem to edit my post. But found the answer to my question above