The NDR (No Dividend Risk) product was launched on October 2010 in response to the customer demand to eliminate the risk associated with forecasting dividends. This is achieved by adjusting down the previous trading day’s settlement price (by the dividend amount) at the start of business on ex-dividend date.
OneChicago's No Dividend Risk (NDR) futures are designed to capture the dividend exposure while holding a futures position through a dividend ex-date. The goal of the product is to mirror the net effect of holding the equivalent stock position. This is achieved by adjusting down the previous closing price by the dividend amount on ex-date. Each day the previous closing price is compared against the current closing price to determine the mark to market for futures positions. The adjusting down of the previous close results in increased gains (equal to the dividend) for long and losses for short position holders.
Assumes 100 shares of stock and 1 NDR future contract (100 shares).
|Long NDR Future|
|Short NDR Future|
|Day Action||Previous Close / Cost Basis||Close||Daily Realized||Net Realized||Daily Realized||Net Realized||Daily Realized||Net Realized||Daily Realized||Net Realized|
|D1||Enter Position @ 32.10||32.10||32.00||-10||-10||0||0||+10||+10||0||0|
|*31.90 = 32.40 - 0.50|
|D5||Exit Position @ 31.90||31.75||31.90||+15||+30||-20||-20||-15||-30||+20||+20|