Dividends are an important concept for traders, especially those dealing with Contracts for Difference (CFDs). Understanding how dividends affect your positions can help you manage your trades effectively and avoid surprises.
What Are Dividends?
A dividend is a portion of a company’s profits distributed to its shareholders. It’s a way for companies to share their financial success with stock owners.
For CFD traders, dividends matter because they influence the price of the underlying asset. When a company pays a dividend, the market price of its stock or index typically drops by approximately the dividend amount on the ex-dividend date.
To ensure fairness, MH Markets applies dividend adjustments to your CFD account, so your position value reflects this market change.
Understanding Dividend Adjustments
When a company in an index or a stock you hold pays a dividend, the asset’s value decreases by the dividend amount on the ex-dividend date.
To mirror this mechanism in CFD trading, MH Markets applies a corresponding credit or debit to your account based on your position type:
- Long Position (Buy) You receive a credit.
- Short Position (Sell) You incur a debit.
How Dividend Adjustments Are Calculated
Dividend adjustments are processed daily and applied to all eligible open positions at the end of the trading day before the ex-dividend date.
Example for Long Position
- Trader holds 20 long lots in NAS100.
- Dividend adjustment: $3.55 per lot.
- Credit to Account:
20 lots × $3.55 = $71.00.
This credit offsets the index price drop, keeping your position value neutral.
Example for Short Position
- Trader holds 20 short lots in NAS100.
- Dividend adjustment: -$3.55 per lot.
- Debit from Account:
20 lots × $3.55 = $71.00.
This debit neutralizes the advantage from the price drop, ensuring fairness.
How Adjustments Work
Dividend Adjustment automatically applied to all eligible open positions held at the end of the trading day. It is processed daily or whenever dividends are declared, at 23:59 Server Time.
For the latest list of symbols and dividend rates, refer to MH Markets’ official dividend adjustment page.
Key Takeaways
- Dividends affect CFD prices because the underlying asset drops by the dividend amount.
- MH Markets applies adjustments to keep your position value fair and neutral.
- Long positions receive credits; short positions incur debits.
- Always check updated dividend rates for accurate planning.