How should the market position size and stop‑loss levels be adjusted in anticipation of the distribution event?

Trading outlook for MEGI ahead of the August‑2025 distribution

The upcoming Section 19(a) notice signals the upcoming ex‑distribution date (likely the ex‑date a few days before the August 2025 payout). Historically, funds with a ~10 % annualized distribution tend to experience a price‑drop of roughly 0.5–1 % of the share price on the ex‑date (the “dividend discount”) plus a short‑term uptick in volume as dividend‑capture traders enter. In MEGI’s case the price sits near $14.30 (closing Aug 12) with a NAV of $15.62, implying the cash component per share is roughly $0.15‑$0.20. Expect a tight‑range, low‑volatility environment in the 2‑3 days surrounding the ex‑date, followed by a sell‑off as the dividend is stripped and the fund re‑balances its holdings.

Position‑size & stop‑loss guidance

1. Scale back exposure – If you are a net‑long, consider reducing the position by 30‑40 % (or half if you are a high‑beta/leveraged trader) before the ex‑date. This mitigates the risk of an abrupt “ex‑drop” and the potential short‑term price swing caused by dividend‑capture activity.

2. Tighten stop‑loss – Move the stop‑loss to 0.75 %–1.0 % below the current market price (≈ $0.10‑$0.14 under the $14.30 level) rather than a broader 2–3 % width. This tighter stop protects you from the expected drop while still allowing for normal intraday wiggle. If you plan to hold through the distribution for yield, set a trailing stop at 0.6 % of the current price once the stock re‑establishes a new post‑ex baseline (around $14.15‑$14.20).

3. Watch technical cues – The 10‑day EMA is currently flat at ~ $14.28, with the 20‑day EMA still slightly above, indicating a mild bearish bias. A break below the $14.00 support (the prior low on July 30) would trigger an additional 2‑3 % downside target, so consider a hard stop at $13.85 if you wish to stay fully exposed. Conversely, if the price holds above $14.20 and rebounds on the day after the ex‑date, you may re‑scale in gradually, using a 1%‑risk‑per‑trade model to rebuild position.

Bottom line: Reduce size, tighten stops to roughly 1 % below current levels, and monitor the ex‑date price action. If the price holds above the $14.20‑$14.25 zone after the dividend, consider re‑entering on a pull‑back with a tighter risk‑per‑trade framework; otherwise, stay defensive until a new trend establishes.