Before today, I was sitting on a handsome profit of £520. I’d managed to accumulate this since 1st August and was feeling pretty good. A list of all the trades I made to get there can be found in my twitter account. Today, however, I had a bad that saw me lose almost 50% of my profits.
Lots went wrong today, but I’ll start with the moment that kicked it all off. About 2 weeks ago, I opened a long position on Man Group (EMG) after reading about how much dividend they planned to pay. They were going to pay about 7.5% of the share price as an interim dividend. That worked out at 6.12p per share, on a share price of 79p – a pretty good yield.
Thinking that a lot of investors would jump on this to get the 7%, I went long on the position straight away. I successfully held this position for a profit for a week or so until I was panicked into selling it. The upside is that it didn’t go up much more before the ex dividend day so I didn’t lose much profit on my long position.
My plan was to hold this until ex dividend day and then short it.
Today was that day.
I went short on Man Group last night to prepare myself for a lower opening price tomorrow. That part of the plan did go as I was expecting it to and by 9am I was sitting on £87 paper profit on my Man Group position.
But what I didn’t realise that the spreadbetting firms aren’t that stupid and won’t let you make easy money like that, so when I logged into my IGIndex account to check sums, I noticed I’d lost £153 for an “Adjustment for dividend in Man Group Plc”.
After seeing this, I promptly cashed in my £87 profit on the position and closed out.
I don’t know if IG make this adjustment if you hold any short position during ex dividend day or if it was because I specifically opened the short the day before the ex dividend. I’ll have to ask on some forums about that unless someone can post the answer in the comments section or to me via twitter.
Moral of the story so far: don’t go short the day before ex dividend day unless you expect the share price to fall below the reduction as a result of dividends.
The Surprise Charge Messed with My Head
As has happened to me once before, the surprise of this knocked me out of sync, and I panicked into ‘making the money back’ like a gambler would on the roulette table and ended up losing even more money.
In the end, I placed 4 trades that I wouldn’t have placed if my account had been up for the day; 3 on Spot Gold but also a short on Halfords. Additionally, my Chime Communications position stopped out at 193 for a loss of £50.
It is simple mental discipline that I am lacking here combined with a little lack of knowledge (admin charges for ex divi days??) and it’s time to put it right or else I’ll eat through what’s left in my account in no time.
Spread Bet Longs:
- Spot Gold : 1602.08 @ £25 p/point with STOP LOSS at 1600.08
- Spot Gold : 1603.33 @ £25 p/point with STOP LOSS at 1601.33
- Corn: 791 @ £5 p/point with STOP LOSS of 790
Spread Bet Shorts:
- Halfords : 234.41 @ £15 p/point with STOP LOSS at 238
- Man Group : +£87
- Chime Communications : Stop Loss Hit = -£49.75
- Spot Gold : 1602.08 @ £25 p/point with STOP LOSS at 1600.08 – Reached stop loss = -£50
- Spot Gold : 1603.33 @ £25p/point with Stop Loss at 1601.33 – Reached Stop Loss = -£50
- Corn : 791 @ £5 p/point : Stop Loss Hit = -£5
- Admin Charges : -£153
Profit/Loss for Day