Covered call/Reverse split

Discussion in 'Options' started by NCSUtrader, Aug 1, 2011.

  1. Hello all,

    I previously owned about 250 shares of a stock, and was about to write two calls on it, however a reverse split occurred and now I only own about 50 shares. I have a feeling that there is probably nothing I can do now, but I wanted to ask anyways, is there any way possible that I can still write a covered call on the remaining shares? My account is with td ameritrade.

  2. When there's a reverse split, existing option contracts are adjusted to reflect the split. So in the case of a 1-for-5 reverse common stock split, a contract would usually be adjusted to require the receipt or delivery of 20 shares.

    If these adjusted contracts still exist, then you could write 2 covered calls on your 50 shares (covering 40 shares). If they have expired and only standard 100 share contracts now exist, your only choice would be to buy another 50 shares.
  3. thanks for clearing it up!