reverse split question <<rookie>>

Discussion in 'Trading' started by ASmith01, Jul 15, 2009.

  1. ASmith01


    Hey guys, i've been trading for about 4 months now, still trying to learn the ins and outs of the game. Seen that AIG and FAS/FAZ got a reverse split brought a copule of questions to mind.

    -What happens if you are short in a stock when it gets a reverse split?
    -does the value of your account change at all?
    -are you even allowed to short a stock that is about to get a rev.split?

    I also noticed that AIG started selling off after the split. Is this the usual thing to do after a rev.split?

    thanks for any help.
  2. 1) Nothing. You have fewer shares at a higher price. A times B equals B times A.
    2) No
    3) Yes. If it's shortable through your firm.
    4) With reverse-splits, company fundamentals don't magically "improve" out of thin air. Bearish sentiment can still remain and attract additional selling and short-selling potentially driving down the issue. :cool:
  3. ASmith01



    Thanks for answering my questions Nazzdak:) I appreciate it!