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Let us say I am short a stock ABC. I buy the stock back on the ex dividend date. Now, when I buy the stock, I have to return it to the original lender that loaned me the stock,correct?

If that is the case, after buying the stock, do I get to keep the dividend? Or the dividend goes to the original owner? My guess is the latter.

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  • If you want to capture the dividend, short a put.
    – Knuckle-Dragger
    Commented Mar 19, 2015 at 5:35
  • Can you elaborate? Do you mean short an in the money put that expires before the ex dividend date?
    – Victor123
    Commented Mar 19, 2015 at 18:30
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    No the put actually has to expire after the ex-div, otherwise it's holder won't be privy to the divy. See the middle section of this article - "The Effects of Dividends" investopedia.com/articles/optioninvestor/03/121003.asp ...and this article has a neat little blurb about how interest rates will affect call/put pricing. Relevant with all the hawk activity at the Fed. investopedia.com/university/options-pricing/…
    – Knuckle-Dragger
    Commented Mar 19, 2015 at 18:40

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You went from potentially owing the dividend to being neutral, not owing. Not getting. Your position was -100, then 0, not positive. The guy you borrowed from gets her dividend regardless, if not from you then from the company paying its dividend.

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    Actually if he buys back stock on ex-dividend date he will still have to pay the dividend to the person borrowed off.
    – Victor
    Commented Mar 19, 2015 at 8:58
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    Funny, title for question says before and body of question, on. Of course you are right.
    – JTP - Apologise to Monica ♦
    Commented Mar 19, 2015 at 9:36
  • A subtle point is that the lender receives a “payment in lieu of dividend” and this can lead to higher taxes for the lender because he loses qualified dividend rate (the buyer of the loaned shares is the one who receives the actual dividend).
    – Bob Baerker
    Commented Feb 19, 2020 at 14:55

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