PRE-EX MOMENTUM
Buy 3-5 days before ex-date, sell the day before. Captures the price run-up that typically occurs as dividend seekers pile in, without holding through the ex-date price drop.
- Pros
- Avoids ex-date price drop entirely
- No tax event from dividend income
- Capital freed faster for next play
- Works even if dividend is cut or delayed
- Cons
- Run-up is not guaranteed every cycle
- Requires timing and active monitoring
- Short-term capital gains tax applies
HOLD THROUGH
Buy the day before ex-date, hold through to collect the dividend, then sell 1-3 days after. Captures the actual dividend payment but absorbs the ex-date price drop.
- Pros
- Guaranteed dividend income if held on record date
- Price often recovers within days
- Simpler execution with less timing risk
- Cons
- Ex-date drop can exceed dividend amount
- Capital locked for several extra days
- Dividend taxed as ordinary income if not qualified
- Recovery not guaranteed in weak markets