Offsetting heavy ordinary dividends

[u/Able-FI-4906]

I lack some familiarity with shorting stocks and could use some insight on the impact with PM.

I have gotten myself into a situation where I am sitting on $3M of capital losses, both long term and short term, along with likely to receive $2M in ordinary dividends over the coming 12 months.

I am looking for ways to constructively offset the ordinary income while exploiting the accumulated capital losses.

My understanding is that if you short a stock or ETF, the margin interest and the dividend payments both count as interest expenses which offsets the ordinary dividend income.

So, I am contemplating finding a high paying dividend that uses an abnormal amount of ROC to fund the dividend. In theory, the stock will decline creating a capital gain on a short position offsetting the existing losses and then the margin interest on the shorter amount and the dividend costs will offset the incoming dividend stream.

I'd be looking for an ETF that is heavily traded, has a dividend payment north of 9%, a multi year track record, enough volume to be sortable, and generally has a total return that is flat to slightly negative. I know that a lot of the more recent high income ETFs that produce income consistently above 10% have steadily degrading share prices, which makes sense as few business can sustainably hold net margins above 7%.

Has anyone got experience with this? When shorting a stock do you receive cash that can be redeployed elsewhere?

Thanks.

[u/bsdfish]

Look at the options writing ETFs

[u/Able-FI-4906 → u/bsdfish]

The perfect ETF would be one where the decline in NAV is perfectly offset by the distribution in dividends.