Question

If you short sell a single share of stock and it pays a $1 dividend while you are in the short position:

Select one:

a. You will definitely gain a dollar from the dividend payment

b. You will likely lose a dollar from the dividend payment

c. You will likely neither gain nor lose from the dividend payment

d. Your broker will gain a dollar from the dividend payment

Answer 1

if you mshort sell a single share of stock and it pays a $1 dividend while you are in the short position the broker will gain a dollar from the dividend payment

so,the correct answer to the above question is option d

if you are short on a dividend paying stock,you are not entitled to receive the dividend and may have to pay the lender of the borrowed short shares. It is important tonote the exactly when u sold the share short,if it is on the record date ,they willowe the dividend to the broker which willhappen in this scenario.