Don't get me wrong, but if you had kept the shares wouldn't your profit have been 0.60g? If you buy a share, collect the dividend each month and resell, wouldn't you end up with less grams of profit than if you just keep the share?
- John
John, it's more of an unspeakably cool exercise to demonstrate how arbitrage around the exdividend period works -- even in micromarkets!
In fact this all started because Patrick Ch. wondered if there would REALLY be a price move up and down around the dividend. (Even in a micromarket -- just like with a large liquid stock.) In fact, there was last 1st of the month, and there (might) be this dividend period.
Recall that I own 40 (forty!) shares, so I get a massive 24 grams at noon UTC on the 1st of each month. Hold it, it's going up to 0.63 grams next time, they assert, so that will be over 25 grams, and hopefully climbing each quarter. So believe me, I personally want to hold shares. And ISL is also building up a few shares. But why not also take arbitrage profit, if its there, and it doesn't have any capital requirements, doesnt use up any of your capital?
But anyway, the direct answer to you question, if a you ask an arbitrageur: "hey, why not just by and hold Coke shares rather than arbitraging [say] around the dividend -- why the hell do you clowns have an arbitrage division in your hedge fund, why not just [day trade all day | buy and hold | whatever]" ... the answer is that the risk is all but nonexistent (and hence the profits miniscule - that's arbitrage) in situations where the volume is high and the use of yuour capital is all but nonexistent, often just for a very short period of time.
(I think I had to put out 100 grams for only like 5 hours last month, to make the $6 or whatever it was.)
(You of all people must know the value of not typgin up capital! :) )
Makes sense?
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