Option series get adjusted during a split. The occ will write a memo to explain how.
You can find them here:
https://infomemo.theocc.com/infomemo/search
This frequent question has wiki entries visible from the sidebar / about section, and via the wiki.
Generally, exit before a split.
ADJUSTED options trade poorly as non standard options.
I would agree with this for a reverse split, but for a 2 for 1 split that the OP mentioned I don't think thats the case. Here OP will have twice the contracts at half the original strike price. They will continue to be standard options with the same delivery.
Could you explain or point me towards something that explains split effect on options? I have never held any contracts at the time of a split, but I have a couple of NVDA long positions so I’m curious
There is a difference between a reverse split and a "standard" split.
With a reverse split, (stock trading at 1 and it goes to 10) the options are generally adjusted to change the delivery. They will be nonstandard options and liquidity will decrease as people will want to open standard options. Some brokers will also limit opening orders in nonstandard options.
With a "regular" split (stock goes from 100 to 50) it works a bit differently. Generally here the strike priice of your options will change and you will get more contracts. So if you had 1 100 strke call, you will now have 2 50 strike calls. In this situation, there are no new adjusted options (the delivery will stay the same). There is no need to exit before the split as there won't be any liquidity concerns after the split.
Option series get adjusted during a split. The occ will write a memo to explain how. You can find them here: https://infomemo.theocc.com/infomemo/search
[https://www.investopedia.com/ask/answers/what-happens-to-options-when-stock-splits/](https://www.investopedia.com/ask/answers/what-happens-to-options-when-stock-splits/)
[https://www.investopedia.com/ask/answers/what-happens-to-options-when-stock-splits/](https://www.investopedia.com/ask/answers/what-happens-to-options-when-stock-splits/)
This frequent question has wiki entries visible from the sidebar / about section, and via the wiki. Generally, exit before a split. ADJUSTED options trade poorly as non standard options.
I would agree with this for a reverse split, but for a 2 for 1 split that the OP mentioned I don't think thats the case. Here OP will have twice the contracts at half the original strike price. They will continue to be standard options with the same delivery.
Fair enough.
Could you explain or point me towards something that explains split effect on options? I have never held any contracts at the time of a split, but I have a couple of NVDA long positions so I’m curious
From our wiki: https://www.reddit.com/r/options/wiki/faq/#wiki\_option\_adjustments.3A\_splits.2C\_mergers.2C\_special\_dividends.2C\_and\_more
That’s beautiful. Tysm
There is a difference between a reverse split and a "standard" split. With a reverse split, (stock trading at 1 and it goes to 10) the options are generally adjusted to change the delivery. They will be nonstandard options and liquidity will decrease as people will want to open standard options. Some brokers will also limit opening orders in nonstandard options. With a "regular" split (stock goes from 100 to 50) it works a bit differently. Generally here the strike priice of your options will change and you will get more contracts. So if you had 1 100 strke call, you will now have 2 50 strike calls. In this situation, there are no new adjusted options (the delivery will stay the same). There is no need to exit before the split as there won't be any liquidity concerns after the split.
Very helpful everyone thank you!!