Dividend Arbitrage

An options trading strategy that involves purchasing put options and an equivalent amount of underlying stock before the ex-pidend date and then exercising the put after collecting the pidend. When used on a security with low volatility (causing lower options pmiums) and a high pidend, pidend arbitrage can create profits while assuming very low to no risk.

Taobiz explains Dividend Arbitrage

For example, suppose that stock XXX is trading at $50 and is paying a $2 pidend in one week's time. A put option with expiry three weeks from now and a strike price of $60 is selling for $11. A trader wishing to structure a pidend arbitrage can purchase one contract for $1,100 and 100 shares for $5,000, for a total cost of $6,100. In one week's time, the trader will collect the $200 in pidends and the put option to sell the stock for $6,000. The total earned from the pidend and stock sale is $6,200, for a profit of $100.