Splits effect on options pricing

[mhertz]

Just a general question - what happens to your options when stocks split?

e.g. If a common share is trading at $100, and I have an option with a strike price at $100, and it splits 2:1, therefore dropping the common share price to $50.00, my options are now basically worthless - or are they? What then happens -- do my options now turn into $50 strikes?

Any knowledge would be appreciated.

[jacobnbr1]

please do not hold options through a split. what happens is your options are adjusted and split. it is never in your favor to hold through a split, the stock will be in shock after the split. they typically fade down some and trade sideways for a while deeming your options worthless in time decay. also remeber the options makers will do whatever they can to strip the cash from you, so becarful. i like to buy calls going into a split and that is it. if you need to have options in this position sell and rebuy after the split, but i normally sell the calls after the last rally into the split that normally occours a week or two befor the split date. i must see the chart to determine if a rally needs to happen though.

[NINOHERO]

Just a general question - what happens to your options when stocks split?

e.g. If a common share is trading at $100, and I have an option with a strike price at $100, and it splits 2:1, therefore dropping the common share price to $50.00, my options are now basically worthless - or are they? What then happens -- do my options now turn into $50 strikes?

Any knowledge would be appreciated.

You'd Have 2 $50 Strike options. The CBOE puts out circulars explaining all the funky adjustments like cash dividends splits and the sort.