I'm a noob and it's my first stock split. Reading Tesla Announces a Five-for-One Stock Split | Tesla, Inc. sound for me like there is no real stock split. just additional share so the price should go down per share. this would be very bad for out of the money calls...
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Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable
- Thread starter AudubonB
- Start date
Language from Apple
The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.
What is the effective date of the split?
There are several key dates.
The Record Date – August 24, 2020 - determines which shareholders are entitled to receive additional shares due to the split.
The Split Date – August 28, 2020 - shareholders are due split shares after the close of business on this date.
The Ex Date – August 31, 2020 - the date determined by Nasdaq when Apple common shares will trade at the new split-adjusted price.
What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.
If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.
Are there any U.S. federal income tax consequences as a result of the stock split?
There will be no taxable income as a result of the stock split for U.S. federal income tax purposes. The tax basis of each share owned after the stock split will be 1/4th the amount it was before the split. For example, if you owned 100 shares before the split with a tax basis of $40 per share, after the split you would own 400 shares of stock with a tax basis of $10 per share. Foreign investors should consult their local tax advisors. Although this tax information is provided for your assistance, we are not providing personal tax advice. You should consult your personal tax advisor regarding the tax consequences of any transaction you undertake with these shares.
How will I receive the split shares?
If you hold shares in a brokerage account, the additional shares to reflect the split will be deposited into your account in the days following the Split Date (August 28, 2020). Contact your broker if you have any questions regarding timing. If you have a share certificate or hold your shares directly with Apple’s transfer agent, Computershare Trust Company, N.A., the post-split shares will be deposited in a book-entry position and Computershare will mail you a statement indicating the number of shares that you own following the split. We will not be issuing new share certificates. If you have a physical stock certificate, there is no need to return it. You will be credited the split number of shares in a book-entry position.
The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.
What is the effective date of the split?
There are several key dates.
The Record Date – August 24, 2020 - determines which shareholders are entitled to receive additional shares due to the split.
The Split Date – August 28, 2020 - shareholders are due split shares after the close of business on this date.
The Ex Date – August 31, 2020 - the date determined by Nasdaq when Apple common shares will trade at the new split-adjusted price.
What happens if I buy or sell shares on or after the Record Date and before the Ex Date?
If you sell shares on or after the Record Date (August 24, 2020) but before the Ex Date (August 31, 2020) you will be selling them at the pre-split price. At the time of the sale, you will surrender your pre-split shares and will no longer be entitled to the split shares. Following the split, the new owner of the shares will be entitled to the additional shares resulting from the stock split.
If you buy shares on or after the Record Date but before the Ex Date, you will purchase the shares at the pre-split price and will receive (or your brokerage account will be credited with) the shares purchased. Following the split, you will receive (or your brokerage account will be credited with) the additional shares resulting from the stock split.
Are there any U.S. federal income tax consequences as a result of the stock split?
There will be no taxable income as a result of the stock split for U.S. federal income tax purposes. The tax basis of each share owned after the stock split will be 1/4th the amount it was before the split. For example, if you owned 100 shares before the split with a tax basis of $40 per share, after the split you would own 400 shares of stock with a tax basis of $10 per share. Foreign investors should consult their local tax advisors. Although this tax information is provided for your assistance, we are not providing personal tax advice. You should consult your personal tax advisor regarding the tax consequences of any transaction you undertake with these shares.
How will I receive the split shares?
If you hold shares in a brokerage account, the additional shares to reflect the split will be deposited into your account in the days following the Split Date (August 28, 2020). Contact your broker if you have any questions regarding timing. If you have a share certificate or hold your shares directly with Apple’s transfer agent, Computershare Trust Company, N.A., the post-split shares will be deposited in a book-entry position and Computershare will mail you a statement indicating the number of shares that you own following the split. We will not be issuing new share certificates. If you have a physical stock certificate, there is no need to return it. You will be credited the split number of shares in a book-entry position.
Ameliorate
Member
Let's just assume TSLA is at 1500 on the 28th, if you still hold 25 shares (37.5K) , the day after the split you will now own 125 shares, each worth 300 (37.5K).
Just leaving this here. If you know then you know.
Bet TSLA
Active Member
This stock split does mean that the shares that I bought at 420 and 888.88 will lose their cachet. Utterly. I'm devastated. Inconsolable.
They will finally be right for once!
You will have 125 shares of TSLA on September 1st. The trading on the 1st will open at roughly last session's closing price divided by 5.
Your brokerage will automatically adjust the count of shares and options.
Jonas is STILL wrong.
I thought that your calls just split along with the stock.
You read too much into it. It's a split. Now go take a bubble bath.
The quicker to 420 it is...
woodisgood
Optimustic Pessimist
I better start saving up another 420 bucks. Unless S&P gets announced before Aug 21...then we might not get to do that again.
Runarbt
Active Member
"If an investor is short a stock on the record date, they are not entitled to the dividend.3 In fact, the investor is instead responsible for paying the dividend owed to the lender of the shorted stock that they borrowed. Investors short a stock..."
So, as far as I understand, all short have to cover before 21.aug? or have to buy back 5 shares instead of one..
And Jonas’s targets will finally start to make sense....GLJ too lol
Can you please explain?
What happens to OTM calls, LEAPs?
woodisgood
Optimustic Pessimist
This sounds highly unfavorable for shorter as opposed to neutral. Does this not mean we should be squeezing shorts massively before the split?
How Stock Splits Affect Call Options.
Call options give you the right to buy a stock at a certain share price. If the stock splits and the share price drops, that could be detrimental to the value of your option contracts. To adjust for the effects of the stock split, your options position will also be changed. Tim Plaehn
Stock Split Effects
A stock split increases the number of a company's shares and at the same time reduces the share price. A split is declared with the number of new shares to replace the current outstanding shares. Typical split ratios include 2 for 1, 3 for 1, 3 for 2 and 5 for 2. An investor who owned 100 shares of a $50 stock would own 200 shares of a $25 stock after a 2-for-1 split.
Whole Splits and Options
A whole number stock split ratio will result in a proportional increase in call options and a proportional decrease in the option strike price. Whole splits have a "1" in the second part of the ratio, such as 2 for 1, 3 for 1 or 5 for 1. For example, if you own two $50 strike price calls on a stock that declares a 5-for-1 stock split, after the split you would own 10 call options with a $10 strike price.
Fractional Stock Splits
Call option adjustments are handled differently for uneven stocks splits such as 3 for 2 or 5 for 2. A trader cannot hold a fractional option contract which would be the result if one contract was adjusted in a 3-for-2 ratio. With this type of split, the number of shares a call option covers is increased from the standard 100 shares by the split ratio. For example, one call option with a $60 strike price would be for 150 shares with a $40 strike price after a 3-for-2 split.
The purpose of adjusting option contracts when a stock splits is to keep the value of the options in line with the number of shares and new share price after the split takes effect. The biggest change if you are holding call options would be the potential for higher commissions if you sell a larger number of contracts. Also, since the share price drops due to a split, a $1 change in the value of the underlying stock will have a larger proportional change on the value of the call options.
Call options give you the right to buy a stock at a certain share price. If the stock splits and the share price drops, that could be detrimental to the value of your option contracts. To adjust for the effects of the stock split, your options position will also be changed. Tim Plaehn
Stock Split Effects
A stock split increases the number of a company's shares and at the same time reduces the share price. A split is declared with the number of new shares to replace the current outstanding shares. Typical split ratios include 2 for 1, 3 for 1, 3 for 2 and 5 for 2. An investor who owned 100 shares of a $50 stock would own 200 shares of a $25 stock after a 2-for-1 split.
Whole Splits and Options
A whole number stock split ratio will result in a proportional increase in call options and a proportional decrease in the option strike price. Whole splits have a "1" in the second part of the ratio, such as 2 for 1, 3 for 1 or 5 for 1. For example, if you own two $50 strike price calls on a stock that declares a 5-for-1 stock split, after the split you would own 10 call options with a $10 strike price.
Fractional Stock Splits
Call option adjustments are handled differently for uneven stocks splits such as 3 for 2 or 5 for 2. A trader cannot hold a fractional option contract which would be the result if one contract was adjusted in a 3-for-2 ratio. With this type of split, the number of shares a call option covers is increased from the standard 100 shares by the split ratio. For example, one call option with a $60 strike price would be for 150 shares with a $40 strike price after a 3-for-2 split.
The purpose of adjusting option contracts when a stock splits is to keep the value of the options in line with the number of shares and new share price after the split takes effect. The biggest change if you are holding call options would be the potential for higher commissions if you sell a larger number of contracts. Also, since the share price drops due to a split, a $1 change in the value of the underlying stock will have a larger proportional change on the value of the call options.
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