Dividends and Futures Contract

If the expected growth rate in dividends for stocks increases by 75 basis points, which of the following would benefit the most?

A) Shorting a futures contract on an equity index.

B) Going long a futures contract on an equity index.

C) having a long position in puts on the equity index.

I picked answer A, thinking any time a dividend is paid on a stock it decreases the price by that amount. But the book said the answer was B. Can anybody shed light on this?

Thank you.


to quote B2k, but seriously BUMP because i got this exact question wrong too, by picking the same thing. to my understanding, the Futures Price (or forward price, for that matter) is dereased by the PV of divs, right? so how would someone who is LONG the futures benefit from this increse in divs?

it seems completely counter to what we all learned. then again, is this just a case of schweser being stupidly worded?

Could the logic be that if the dividend growth rate increases, the spot price increases , which would result in a high futures price going by the formula Futures = Spot x exp(RFR - div)(duration)

Therefore, a long futures would profit when dividend growth rate increases.

I got it wrong as well. Think about it in BSM with dividend, call option value is decreased by the dividend yield as well (e^-rt). So i am confused.