"The last few days the spread has been up to 10% and the dividend return is only around 2.8% in comparison."
Well yes but the idea (if it holds water) only applies to the amount the dividend impacts SP and not other factors. The current drop in SP has nothing to do with this as we haven't reached the ex-date yet.
Yes of course the current SP drop has nothing to do with the dividend approaching or not yet passed, which is actually my point. In a theoretical efficient market you would actually expect the sp to rise slightly over the period leading up to the dividend, but of course this hasn't happened
Perhaps I should of been clearer originally. My original point, which I see I have made vaguely, is that if you are going to technical trade ( not a good idea IMHO) a highly liquid and volatile stock ( volatile in both directions) then you may as well hold on for the dividend ( if it's only a couple of days away) as its a guaranteed cash flow. Given the bid/ask spread and the volatility, the actual trade itself could go anywhere at all, both being profitable or a loss. On average however, and again this is from options theory, is that in this particular case you would expect these profits or losses to even out as the situation described by the poster making the trade is a 50/50 bet. If patong made 1000 of similar trades to this I would expect him to break even. Hence my advice in this particular iliquid, big spread, volatile stock the only edge he would have, on average, is to at least keep the dividend by holding for three days.
"My read of the situation is that the drop in SP is likely due to the income statement which would look very disappointing - if the market didn't read the rest of the report and/or had a superficial understanding of how the accounting works."
