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Post by greedynoob on Nov 27, 2012 14:31:52 GMT -8
I think the special dividend is just forward paying the dividend that would be paid for 1Q2013. The reason, as always, is a tax advantage for the investor expecting taxable income over $250k next year who will be subject to a much higher tax on dividends. I doubt Apple would make such a politically foolish move for a CA corporation. They still have a lot more to gain from the international tax reforms that both the House and Obama are proposing. Ah, so the payment schedule is special, not the total annual amount. Got it.
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Post by wheeles on Nov 27, 2012 14:43:50 GMT -8
Oh dear. Those will kill AAPL, or really mess up trading intraday as the MMs drag the price to where they want it at the close to make those daily options worthless. Then overnight you'll get all these gaps. It'll make swing trading even more necessary. These "mini" options are for smaller amounts of underlying shares per contract (10 vs. 100), not "daily" expirations. Not sure how or if that would screw with the intraday action. I see. Thought they were dailies. I know that's been talked about in the past as have hourlies, which is the height of insanity. What duration do these minis have?
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Post by nkmho on Nov 27, 2012 15:00:11 GMT -8
These "mini" options are for smaller amounts of underlying shares per contract (10 vs. 100), not "daily" expirations. Not sure how or if that would screw with the intraday action. I see. Thought they were dailies. I know that's been talked about in the past as have hourlies, which is the height of insanity. What duration do these minis have? From the ISE announcement:
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Post by jdrizzo89 on Nov 27, 2012 15:09:43 GMT -8
the FUD reflecting to other companies, unfortunately not making front page news... buisness insider article on SAMSUNG having bad asian workplace policies -- wont link article
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Post by mbeauch on Nov 27, 2012 15:36:58 GMT -8
I think the special dividend is just forward paying the dividend that would be paid for 1Q2013. The reason, as always, is a tax advantage for the investor expecting taxable income over $250k next year who will be subject to a much higher tax on dividends. I doubt Apple would make such a politically foolish move for a CA corporation. They still have a lot more to gain from the international tax reforms that both the House and Obama are proposing. A special dividend is a one time payment. Not something that will reoccur. The quarterly dividend has been announced and will continue going forward. This quarters divvy has been paid, the next one will come in February. They have been popping up everywhere. I would not be surprised if some do not borrow just to pay a special dividend. This is stealing, nothing else.
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Post by kloot on Nov 27, 2012 16:55:24 GMT -8
Big bird, where have you been. Thought you might have ended up on someone's table last Thursday. ;D Just taking a bit of a breather. Didn't have much to contribute. Still don't really. It's very difficult to have an objective take on things when the invisible hand puts its big thumb on the scales. Yesterday that thumb belonged to Citi. A 3.5% ramp when the rest of the market was down, was just plain crazy. Clearly an attempt to squeeze out the last of the shorts. The sad thing is that when you do that, a big drop usually follows as there's nobody there to cover into the fall, so all you have are sellers. We got a another attempted short squeeze intraday today at 12.38pm ET to tack on 5 bucks in 8 minutes. No doubt whoever kicked that off was happily fading it at the top. It's a shame that things have got so massively distorted and you can't just buy companies with good prospects. You have to put up with all this BS every day. the 12:38 ramp was directly correlated to cnbc hyping the possibility of a special dividend. ridiculous.
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Post by jeffi on Nov 27, 2012 17:17:39 GMT -8
ALERT: I am considering closing all of my long calls or spreads tomorrow in fear of a large "special" one time dividend that would occur before the close of 2012. Please review my logic and comment.
1. Dividend tax rates may increase as much as 289%, from the current 15% to as high as 43.4 percent when one includes a 3.8 percent tax on “unearned income” for those with a gross income above $250,000 a year.
2. Apple has a massive cash hoard (~$130 per share of which 1/3 is held in the USA).
3. Apple could declare a one time dividend up to ~$43 (1/3 of ~$130 held in US), but probably lower unless they float a bond offering in which the could presumably raise the dividend substantially higher.
4. What will the stock do if they declare this one time dividend? At a minimum, the stock will drop after the dividend is paid (actually ex dividend).
5. If you are long calls they will therefore lose value after the one time dividend is paid (ex dividend).
6. If you are short calls, they will likely be exercised if the call premium on the common shares is lower than the special dividend amount.
7. The nightmare scenario is that your short calls are assigned, creating a short position that if not closed in time will be required to pay the dividend.
8. In any event, if the dividend is substantial and paid before your call expires or before you exercise your long call... You will take some kind of a hit because the Apple common shares will drop after ex dividend date.
Do I have this right? Shouldn't all call holders that are exposed be concerned?
Note: I edited #1, which previously listed the possible LTC gains tax increase, mistakenly labeled as the possible one fir dividends.
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Post by tradervic on Nov 27, 2012 17:20:09 GMT -8
I think the special dividend is just forward paying the dividend that would be paid for 1Q2013. The reason, as always, is a tax advantage for the investor expecting taxable income over $250k next year who will be subject to a much higher tax on dividends. I doubt Apple would make such a politically foolish move for a CA corporation. They still have a lot more to gain from the international tax reforms that both the House and Obama are proposing. A special dividend is a one time payment. Not something that will reoccur. The quarterly dividend has been announced and will continue going forward. This quarters divvy has been paid, the next one will come in February. They have been popping up everywhere. I would not be surprised if some do not borrow just to pay a special dividend. This is stealing, nothing else. WYNN just essentially did that
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Post by greedynoob on Nov 27, 2012 17:20:51 GMT -8
3. Apple could declare a one time dividend up to ~$43 (1/3 of ~$130 held in US), but probably lower unless they float a bond offering in which the could presumably raise the dividend substantially higher. They could also drop the iPod, Mac, iPhone and iPad lines, and start making toaster ovens instead--it's just about as likely.
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Post by rosie on Nov 27, 2012 17:25:38 GMT -8
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Post by phoebear611 on Nov 27, 2012 17:29:24 GMT -8
The whole special dividend thing would wreak havoc with the stock as many would rush in to buy - collect the div - and dump. Talk about volatility! If they really wanted to manage their cash balances - prudently and in the best interest of their shareholders - they would announce a buy back. My gut tells me they will do nothing....not a special dividend, not a buy back.
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Post by mbeauch on Nov 27, 2012 17:29:40 GMT -8
3. Apple could declare a one time dividend up to ~$43 (1/3 of ~$130 held in US), but probably lower unless they float a bond offering in which the could presumably raise the dividend substantially higher. They could also drop the iPod, Mac, iPhone and iPad lines, and start making toaster ovens instead--it's just about as likely. TC would is a better CEO than that. He would not borrow money to pay a dividend, Apple does not do stupid shit like that. Apple is not going to burn all of its US cash either to pay such a high dividend. Jeffi, you do what you want, but selling now because of a dividend that might come makes no sense to me. It is not like it would happen tomorrow.
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Post by mbeauch on Nov 27, 2012 17:35:55 GMT -8
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Post by Apple II+ on Nov 27, 2012 17:42:12 GMT -8
jeffi,
The rule for how a one time dividend affects options is that the strike price is adjusted by the amount of the dividend.
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Post by phoebear611 on Nov 27, 2012 17:53:11 GMT -8
Granted - this is from Seeking Alpha - but a bit thought provoking with respect to what they regard as a sudden surge in R&D:
"There have been many rumors floating around regard the new iTV or iPanel, depending on which rumor about the name you believe, with little confirmation from Apple themselves. If history is any guide, when Apple tends to launch a unique product line, it tends to be disruptive game changer. The iPod, iPhone, and the iPad are three such i-technologies where mystery surrounded them before their official launches that changed our lives. Or perhaps this R&D runaway R&D spending is a sign of inefficiency management. With the recent firing of their maps manager, it's possible that what's really bubbling is hidden trouble for Apple which throwing money at the problem hasn't solved."
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Post by rickag on Nov 27, 2012 17:55:01 GMT -8
jeffi, The rule for how a one time dividend affects options is that the strike price is adjusted by the amount of the dividend. Just curious, this works well in $5 dividend increments, but what happens if the dividend isn't in a $5 increment? Round off to the nearest $5? Or am I over thinking this?
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Post by artman1033 on Nov 27, 2012 18:05:23 GMT -8
Horace interviews BENEDICT EVANS about all things telecom. GOLLY G Whiz! I found it great! Ben's website is HERE
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Post by jeffi on Nov 27, 2012 18:58:32 GMT -8
Do not let "Jeffi's BS spook anyone". What? Isn't that uncalled for? I asked for constructive feedback. I am trying to prevent myself and others from losing money.
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Post by jeffi on Nov 27, 2012 18:59:51 GMT -8
jeffi, The rule for how a one time dividend affects options is that the strike price is adjusted by the amount of the dividend. Just curious, this works well in $5 dividend increments, but what happens if the dividend isn't in a $5 increment? Round off to the nearest $5? Or am I over thinking this? Can you both explain further? A link would be helpful. Thx
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JDSoCal
Member
Aspiring oligarch
Posts: 4,181
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Post by JDSoCal on Nov 27, 2012 19:10:48 GMT -8
The whole special dividend thing would wreak havoc with the stock as many would rush in to buy - collect the div - and dump. Talk about volatility! If they really wanted to manage their cash balances - prudently and in the best interest of their shareholders - they would announce a buy back. My gut tells me they will do nothing....not a special dividend, not a buy back. I disagree. The same argument could be made for any dividend. Remember the stock price drops by an equal amount to the divy, so it's not like it's free guaranteed money. Personally, I like when Apple crow-bars open its wallet and gives me money. Long overdue. But I doubt it will happen, especially considering Apple didn't raise the dividend this quarter by a single penny.
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Post by jeffi on Nov 27, 2012 19:17:52 GMT -8
Regarding the potential risk to option holders in the event of a special dividend:
As an FYI... I had bull call spreads on which the short call was assigned "called away" before the last dividend. This happened on both AAPL and MET spreads. It created a massive headache and a loss of profits (created a short common position with associated increases in margin and a dividend payout by me).
I am trying to avoid further damage. I am not trying to scare people out of Apple. If I close my long calls I will use the proceeds to purchase common shares. I am very optimistic about Apple at these levels.
Didn't MSFT issue a massive special dividend many years ago? Why isn't it possible for Apple to consider one? They have the largest cash balance in the history of the market.
Isn't it prudent to consider the possibilities? Why would Mark B call this "BS"?
I have been a very successful long term holder of Apple. I also have nearly doubled my capital, compounded for 5 consecutive years (over a 30x return).
Jeffi
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Post by michelc on Nov 27, 2012 19:30:03 GMT -8
What is the proportion of aapl owner outside te USA? as that increase in dividend only affect US people's it doesn't make sense if the majority of owners are outside USA . Also what is the effect of that taxes on institution? Do they have to pass it along?
Just curious
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Post by mbeauch on Nov 27, 2012 19:32:03 GMT -8
My disgust comes from your urgent alert to sell everything tomorrow. If you had just put forth the points you stated it would not have rubbed me so bad, but your "fire in the theater" antics do not sit well. The BS is related to your urgency, not the fact of having to deal with any special dividend. For all of our sakes, I hope this does not happen. I can promise you all, you will be sorry if this comes to pass. Yes you will get a dividend check, but the value subtracted from AAPL will be more than the dividend payout. Not to mention the price to cash value goes straight to shit. Man this has gotten me in an ill mood.
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Post by Lstream on Nov 27, 2012 19:35:22 GMT -8
Why would Mark B call this "BS"? Jeffi He means Best Suggestion
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Post by jeffi on Nov 27, 2012 19:37:04 GMT -8
Special Dividends are occurring:
So far this quarter, more than 60 companies in the Russell 3000 have announced special dividends, compared to approximately 44 special dividend declarations in all of 2011.
“I think the dividend rate will go up, but not as much as the stance of Obama at the present time,” said Wharton School finance professor Jeremy Siegel. "I don’t think it will be all that much different, but it is going to be higher." "The special payouts, therefore, make sense."
Shares of Las Vegas Sands [LVS 46.36 2.33 (+5.29%), up more than 5 percent Tuesday after announcing late Monday it would pay $2.75 per share, or $2.3 billion in special dividends to shareholders of record Dec. 10. Chairman Sheldon Adelson said the priority is returning capital to shareholders, and he is the biggest shareholder, with a 52 percent stake.
Other companies that announced special dividends this week include Brown Forman, Ethan Allen, Drew Industries, CNH and Insperity. (WYNN last week)
And this... LITTLE ROCK, Ark. - The board of directors of Dillard's Inc., has declared a one-time cash dividend of $5 per share in addition to a quarterly cash dividend of 5 cents per share, according to a statement on the company's website Monday.
Apple is better positioned than any other company to issue a special dividend. Are we prepared for the fallout?
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Post by mbeauch on Nov 27, 2012 19:40:06 GMT -8
What is the proportion of aapl owner outside te USA? as that increase in dividend only affect US people's it doesn't make sense if the majority of owners are outside USA . Also what is the effect of that taxes on institution? Do they have to pass it along? Just curious Dividends are passed through to mutual fund holders. I know in the US we can't actually buy shares of company's outside of the US, we can buy ADR's. I imagine it works the same way for people outside of the US buying AAPL. With that being said, the overwhelming majority of AAPL shares are held in the US through mutual funds. One fund that I have in Tammy's 401k own 6 million shares of AAPL. That is a large chunk for one MF. Heck, SJ's wife has about 10 million shares if I am not mistaken. (will have to double check)
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Post by mbeauch on Nov 27, 2012 19:41:42 GMT -8
Why would Mark B call this "BS"? Jeffi He means Best Suggestion LOL
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Post by jeffi on Nov 27, 2012 19:46:35 GMT -8
My disgust comes from your urgent alert to sell everything tomorrow. If you had just put forth the points you stated it would not have rubbed me so bad, but your "fire in the theater" antics do not sit well. The BS is related to your urgency, not the fact of having to deal with any special dividend. For all of our sakes, I hope this does not happen. I can promise you all, you will be sorry if this comes to pass. Yes you will get a dividend check, but the value subtracted from AAPL will be more than the dividend payout. Not to mention the price to cash value goes straight to shit. Man this has gotten me in an ill mood. My "urgent alert to sell everything"? I said I was "considering" selling all of my long calls or spreads. I also asked for feedback and explained my position. Your reaction was uncalled for to say the least. I now have a better understanding why some complain that anything other than rah, rah, go Apple is attacked. This type of behavior hurts all. To quote myself... "ALERT: I am considering closing all of my long calls or spreads tomorrow in fear of a large "special" one time dividend that would occur before the close of 2012. Please review my logic and comment."
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Mav
Member
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Posts: 10,784
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Post by Mav on Nov 27, 2012 19:51:38 GMT -8
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Post by nkmho on Nov 27, 2012 19:52:05 GMT -8
jeffi, The rule for how a one time dividend affects options is that the strike price is adjusted by the amount of the dividend. Just curious, this works well in $5 dividend increments, but what happens if the dividend isn't in a $5 increment? Round off to the nearest $5? Or am I over thinking this? If there's something like a special dividend of $8.25 for example, and strike of 600 would drop down to 591.75. Example of an odd adjustment like that here: seekingalpha.com/article/405191-apple-options-traders-beware-of-special-dividends
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