Stock has split what happens to the optinon ?

Discussion in 'Options' started by guy990opl, Aug 14, 2008.

  1. Ok I sold naked puts on FXI, recentely it has split 1 to 3, what happens to my naked puts ?

    Does the broker adjust the price when they will be assigned to me this fri ?
     
  2. I think you get 3 options ... and strike/3 ...
     
  3. when you go to your trade screen notice that should be a ticker for the old option (unsplit) and a seperate one for the "new" option (priced based on stock split) Basically there will be two seperate contracts for each month out until like Jan 10. On my screen it shows, for example

    FXI:

    Aug (100)
    Aug (300/100)

    Sep (100)
    Sep (300/100)

    In this case the second one (300/100) would be your option. Hope this helps.
     
  4. if you get assigned you will be assigned 300 longs at the new price for every 1 put you sold
     
  5. ok so in terms of losses/gains % it is going to be the same, right ?
     
  6. yes, it is proportional.
     
  7. The option is split in the same proportion as they stock.

    A by product of this is if you are long you get screwed because the implied volatility is reduced after the split.
     
  8. With whole stock splits (2:1, 3:1, etc), the number of contracts is increased and the strike price is reduced. So a 2:1 on a $30 stock results in 2 contracts having a $15 strike (100x1x30 = 100x2x15).

    With fractional stock splits (3:2, 5:2, etc), the number of shares covered per contract increases and the strike price is reduced. So 3:2 on a $30 stock results in 1 contract with a $20 strike, covering 150 shares (100x30 = 150x20)