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Dividend season: positive growth in dividend derivatives

Release date: 06 Apr 2018 | Eurex Exchange

Dividend season: positive growth in dividend derivatives

During these times of historically low interest rates, investors around the world seek safety, growth and yield. That is why dividend strategies remain an attractive alternative to low risk / low return fixed interest investments. With dividend season starting, it is a good time to take a closer look at Eurex Exchange’s dividend derivatives and the benefits they provide for investors.

With the current market environment, investing in dividends continues to remain attractive. Dividend derivatives are the perfect instrument for any investor for managing and hedging their dividend exposure. As low-volatility instruments, they enable investors to take positions without necessarily exposing themselves to the market fluctuations of the underlying stock itself.

Europe’s broadest offering – all on one platform

Eurex Exchange was a pioneer in offering exchange-traded dividends, introducing EURO STOXX 50® Index Dividend Futures in 2008. Today, we offer investors 150 Single Stock Dividend Futures as well as the leading European indexes, such as DAX®, DivDAX®, SMI®, EURO STOXX® Select Dividend 30 Index and EURO STOXX®/ STOXX® Europe 600 sector indexes.

Strong growth trend for 2018

We have been seeing a strong growth trend in our Single Stock Dividend Futures since the beginning of this year, with approximately 1.6 million contracts traded until end-March. With interesting developments in many sectors, as well as in single stocks, the need to hedge with options positions on the respective index or single stock names has been key for many market participants. In turn, this has also been driving in flows from investors who have taken a directional view on these sectors or specific single names.
But also our EURO STOXX 50® Index Dividend Futures (FEXD) and our EURO STOXX 50® Index Dividend Options (OEXD) have gotten off to a good start this year.  With more than 1.8 million contracts in FEXD and a promising 530,000 contracts traded in the OEXD until end-March, these products are definitely on many investors radar.

Key Benefits 

  • Income protection allows investors to lock in expected & implied dividends to assure income returns
  • Hedging of dividend risk – particularly for structured products and equity options
  • Directional views on dividends – trading of house views on earnings and distributions
  • Isolation of price return/capital growth on equities
  • Dispersion / correlation – trading single stock vs. index dividends
  • Opportunistic trades 
  • Curve trading – terms structures / calendar spreads
  • Diversification
  • Relative value trading – to other asset classes e.g. credit
  • Underlying for dividend linked structures

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