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Stripping !! September 13, 2006

Posted by topedgemonk in Finance.

Naa… it aint what you thought!

STRIP- separate trading of registered interest and principal. Of a bond and selling them as two different zero coupon bonds.

What is dividend stripping?

It refers to a practice where a person buys a share just before dividends are going to be declared, gets the dividend and sells it off – obviously at a lower price. So he gets tax free dividend income. He also gets to show a capital loss in his tax returns.

But, is it worth it? take into account the brokerage, the risk of keeping a share overnight, price slippages in a illiquid market etc..

well… wats the fun in life without some risk?;)



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