Looking for information about the eToro dividends?
Want to understand how buying shares with eToro works and if dividends are paid?
Let me explain everything clearly right away.
(Are you also looking for a tutorial to learn how to use all the eToro features effectively? Here is our eToro training Guide)
How eToro Dividends works on eToro shares
On EToro, the whole instrument trading structure (for currencies, stocks, indices, commodities, bitcoin, etc) is based on CFD.
Contracts for Difference are derivative contracts.
In essence, “derivative” means we don’t have a real purchase of the product, but the user simply speculate on the change in price of the product, called the ‘underlying’ of the derivative contract.
In other words, when you buy a CFD with eToro, you’re not really buying shares of Apple for example, but you are only betting a certain amount about the fact that Apple’s price could rise.
If this will happen, at the time of closing of the trade you will earn from the difference between purchase and sale price.
Otherwise, should the price fall, you will bear a loss instead.
However, I don’t to delve into the technical factor here, we have another post in which we explain in simple terms how CFDs work.
In this post I just want to explain how with eToro you can cash out share dividends as with real shares.
How can eToro pay share dividends?
Yes, that’s right.
When you buy shares of a company through eToro CFDs you can also cash out any dividends, when and if the company decides to distribute them.
How is this possible if the contracts are derivatives?
Essentially, eToro bases its structure on CFDs trading, which are completely derivative contracts, but it also implements a hedging policy of these derivatives on the real market, with the purchase of real shares.
In other words, eToro looks at how its clients are positioned on each CFD instrument, it conglomerates various positions in a large single position, and then it go on the market to buy the equivalent in real shares.
In this way eToro gets dividend payments from the listed company, and is able to turn them to each user with their respective proportions.
As an example, imagine that 100 traders are long on Apple CFDs, and that, adding up all the positions, the overall exposure is 500 shares.
EToro will simply go on the Nasdaq Stock Exchange, where Apple is listed, and actually buy 500 shares to hold in its portfolio, in order to cash out any dividend.
Obviously, this process has been over-simplified to make it clear, but in reality is much more complex and articulated.
In this way, however, you should be clear of how eToro dividends work.
The most logical way to proceed now is to deepen the characteristics of eToro CFDs, as see all the details, including other information on the functioning of the dividends.
See you soon.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.