The hot new idea of the past two years in listed equity derivatives has been dividend futures and options. Exchanges all over the world have started to offer them, and the main contracts have attracted brisk trading. As Roger Aitken reports, many equity derivative specialists are convinced the product is here to stay.
On June 16, as costs mounted from BPs Gulf of Mexico oil spill, the company announced it would cancel its first quarter dividend, due to be paid five days later, and its second and third quarter dividends.
The move had been widely expected but was still a blow to UK equity investors. BPs dividends usually make up a staggering 12% of all dividends paid by FTSE 100 companies. BPs shares lost 5p on the day to 3.37.
Yet one group of investors was happy those who had hedged their exposure to UK dividends using a...