11

Consider this scenario:

During normal market hours, you buy a security 1 day before the ex dividend date. You sell this security in after market trading that same day.

Who gets the dividend, you or the after hours buyer?

Does it depend on the specific security?

  • @Chris thanks for the edit - I wasn't sure how best to word the title. – dss539 May 11 '11 at 18:36
7

The post 4PM session is also called extended trading, it's an extension of that day. Ex dividend occurs when the date changes, not when the day session closes.

  • 2
    Thanks for the answer. Can you cite a source? Also, how do you determine when the day ends? Is that midnight? In which time zone? – dss539 May 11 '11 at 18:36
  • The after hours session on the NYSE is 4-8PM. It happens to be East Coast US time zone "NY". In theory, were there to be exchanges in every time zone trading the same stock, there would have to be a coordinated agreement as to the moment the stock goes ex-dividend. – JoeTaxpayer May 12 '11 at 18:16
  • So, whoever owns the security at market open in pre-market extended hours on the ex div date will get the dividend? Do I understand this correctly? So one could buy 1 minute before the end of after hours, then sell 1 minute after pre-market open, and they receive the dividend? – dss539 May 13 '11 at 19:16
  • Yes. But, for example, a $50 stock with a $1/qtr dividend will open on ex-div day at $49. Of course, this example exaggerates the reality of the smoothness of markets. Check out the close on day one and open for day 2 and you'll find that world events came into play to help determine the days open. So a dividend capture strategy isn't so simple. – JoeTaxpayer May 13 '11 at 20:09

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