If I buy a call option and the stock splits and the price per share goes down with the split, how does that af

Question

fect my call position? It would seem that the option would not move with the split and I would be farther from an in the money position if the stock splits.

Answer 1

The first answer is almost correct. If you had an option with a strike price of $50 and the stock split 2 for 1 the options would be adjusted so that you owned two options with a $25 strike price.

Options are adjusted for splits, extraordinary dividends (usually that means dividends greater than 10% of the stock price), spin-offs and mergers. The goal of the adjustment is always to adjust so the underlying to be the same thing the owner of 100 shares of the stock received while the option position was open.

For examples of adjustments see

http://www.cboe.com/tradtool/contracts.aspx

Answer 2

The strike price for the call option you own will change with the split. For example, if you own an option with a strike price of $50 and the stock splits 2 for 1, then the strike price of the option will become $25 after the split.