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.
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.