In a filing with the SEC last week, Citigroup said it is considering a reverse stock split as part of its effort to convert preferred shares take priority over common shares on earnings and assets in the event of liquidation to common shares.

The value of your holding remains the same:. Citigroup now falls into that category. If a stock falls below a certain price, it may no longer meet the exchange requirements and face delisting or being removed from trading rights on that particular exchange.

If the split results in a shareholder owning less than a minimum required number of shares, they would receive a cash payment and no shares of stock. This may be benficial to a company seeking to be put in a different regulatory category such as an S-Corp which is required to have less than shareholders.

To get this to a somewhat cosmetically acceptable scenario, a 1-for split would be necessary. Perhaps you were out partying the night before and had a bit too much to drink. You woke up the next morning and omitted your first cup of high-octane coffee that might have brought you out of your fog. Through no fault of your own, this drug-induced state causes you to ignore all the fundamental and technical requirements of our system.

The best way to handle these scenarios is to contact your broker or the CBOE Exchange. The split information can be obtained online as follows:. For more information on conventional stock splits, here is a link to an article I published a year ago:.

I also devoted a full chapter in my book, Cashing in on Covered Calls , to the subject of stock splits. They simply will never meet our fundamental and technical criteria. Great performing stocks can oftentimes be located by first identifying those industries that have been favorites of the institutional investors.

One such group in the Chemical Manufacturing-Fertilizer Group. Here is a chart showing a definite reversal of a downtrend for the last several months:. Three stocks that are performing well within this industry are TRA, SQM and CF. Check them out and see if they belong on your watchlist. The final revision of the 4th quarter GDP was down 6. However, there was good news on the economic front last week.

February exisitng home sales rose 5. Consumer spending was up for the second straight month along with an increase in prices, allaying fears of deflation.

February durable goods orders were also up for the first time in seven months. Posted on March 29, by Alan Ellman in Investment Basics.

To send us an email, contact us here. Subscribe to our e-mail newsletter or RSS feed to receive updates.

Stock splits and options - Option Trading FAQ

Contact us by phone at Additionally you can also find us on any of the social networks below:. You express some difficulties in the treatment of tax accounting in reporting options to the IRS. May I suggest a program that I have been using for the last three years by the name of TRADE LOG.

Reasonable and accurate records, including wash sales. We are also working on an enhancement and expansion of the ESOC Ellman System Options Calculator to include tax accounting capabilities. This does not mean that all stocks or industries were down. Some of our favorites from this industry had a positive up-day yesterday.

Check out ESI, APOL and APEI. In the beginning of March the chart pattern of NTES was telling us something….

Reverse Stock Splits and How they Effect our Option Contracts | The Blue Collar Investor

At the end of February this company had a favorable ER and the market responded positively. Those who watched the chart pattern after that noticed the following:. Although there are never any guarantees, a favorable technical picture like this one throws the odds in our favor for a successful result.

Many times I will sell an I-T-M strike after a run up like this, expecting some profit-taking that may cause a temporary downturn in share price. Why do I stress avoiding ERs? They create volatility and risk. Take a look at what happened to APOL today. This has been a great performer in a great industry. BCIs who avoided this one because of the ER are feeling like Albert Einstein today. With only 2 weeks remaining until expiration Friday, we know that time value of option premiums will begin to decay precipitously.

It will take a full year to get that return from a CD. Can you explain what a positive moving average crossover is. You mentioned it in the comment 4 above. Two of the technical indicators we look at when evaluating an equity are the d ema and the d ema. Ideally, we would like to see the shorter term ema above the longer term ema the 20 above the This shows a positive momentum.

When the d ema is BELOW the d ema but the crosses over ABOVE the d ema, that is a positive technical moment especially if it occurs on high volume. Although this is only one part of the puzzle, it is a significant one and always peaks my interest in that stock. This is what I meant by a positive moving average crossover. SGP has recently caught my attention due to its strong fundamentals.

The chart shows an uptrending stock with positive moving average indicators. There is a red flag in that the MACD and Stochastic oscillator recently turned negative. This will usually guide me to an I-T-M strike if I decide to write a cc on this equity. There are unusual strike prices for this stock. These are oftentimes due to mergers and acquisitions.

This means that we are guaranteed a 1. Could you explain how this works and if you recommend using them. Look at a protective put like you are purchasing an insurance policy against a dramatic drop in your stock price. A put is the opposite of a call option…it gives you the right to sell your shares at the specified strike price. The reason I do not use protective puts but have no problem if others do is because of the very nature of my system, its safety and the use of exit strategies.

I have been receiving several email questions of this nature so I plan to write a more detailed article about this topic within the next few weeks. Hi there, my home page is http: Hello Alan, I would first like to think you for your work. It has been very enlightening.

The QID etf inversely follows the qqq index, and the options are very affordable at the time being. They will be reverse splitting this Friday January, 23, , and I was wondering if the stock option priec will also go up ruining my chance to maximize my profits seeign as I can not buy odd lot options in smaller amounts than Should I buy them now or just wait until the reverse split options fall in price again?

Thank you for your time,. Before I get to your question I want to point out that this is a very risky trade. If you have accepted the high risk then okay but I want to be sure you are aware of it and made that informed decision. QID will generate 2x the daily inverse returns of QQQ which has been on fire for quite a while. There is a reason here for the reverse split. Thank you very much for your timely and lengthy answer. I just want to make sure I am clear on a few things.

QID January call option is currently priced 2. Is this how things work with a reverse split? Does the volatility of the pre split stock option significantly diminish post underling issue stock split? Thank you again, you are great. Your leverage will not be impacted by the split. No free lunch either way. The options purchased before the split will only deliver 25 shares after the split. New options will deliver the standard shares.

If your plan is to buy long-term options on this security, pre and post-split makes no difference. Mail will not be published Required.

You can use these tags: Notify me of followup comments via e-mail. You can also subscribe without commenting. Optionally add an image JPEG only.

Site Disclosure Statement Glossary Sitemap Timeline. Members Log In About Us Glossary for Covered Call Writing Free Resources including Ellman Calculator Ask Alan Training Videos Free Training Videos Events Calendar Facebook FAQ. The Blue Collar Investor Learn how to invest by selling stock options.

Covered Calls Beginners Corner — Cash-Secured Puts The Blue Hour The Blue Hour For Premium Members.

How Stock Splits Affect Call Options | Finance - Zacks

Reverse Stock Splits and How they Effect our Option Contracts. What is a reverse stock split?: The value of your holding remains the same: What does a reverse split signal? Ticker symbols would change but the expiration date remains the same as does the premium initially collected. The split information can be obtained online as follows: Industry in the Spotlight: Here is a chart showing a definite reversal of a downtrend for the last several months: Chemical Manufacturing-Fertilizer Industry About Alan Ellman Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing.

Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

Connect With Us To send us an email, contact us here. Additionally you can also find us on any of the social networks below: A Key Component to Successful Long-Term Investing. Email Suggestion from Lou: Dear Alan, You express some difficulties in the treatment of tax accounting in reporting options to the IRS. Lou, Thanks for sharing your experiences and ideas. Alan back home and getting to all your emails.

Those who watched the chart pattern after that noticed the following: Oh those earnings reports….. Alan, Can you explain what a positive moving average crossover is. Steve, Two of the technical indicators we look at when evaluating an equity are the d ema and the d ema. Bob, Look at a protective put like you are purchasing an insurance policy against a dramatic drop in your stock price. Thank you for your time, Most sincerely Brad. Hi Brad, Before I get to your question I want to point out that this is a very risky trade.

Hello Alan, Thank you very much for your timely and lengthy answer. Brad, Your leverage will not be impacted by the split.

Subscribe Here - Have the latest blog articles sent to your inbox. Subscribe to this articles Comments via RSS Feed. Learn how to take a Screenshot so you can add it to your comment. Leave a Reply Click here to cancel reply.

July 15, 8: Washington DC Chapter AAII- Summer Workshop. The New Stock Market- Algorithmic and High Speed Trading January 15, Options That Expire Weekly and Conventional Expiration Cycles September 26, Short Selling: Positives and Negatives January 30, The CBOEs Volatility Index VIX September 11, Penny Pilot Program October 29, MarioG Here is my status and my experiences after Expirat Roni Thanks Barry, I was trying to enter a covered c Barry B Hi Roni, WCN had a 3 for 2 stock split on June Alan Ellman Randal, Yes.

When a strike expires in-the-money Alan Ellman Luis, When I first started with covered call wr. Recommended Investing Links DR. Eric WIsh's Wishing Wealth Blog.

Archives Archives Select Month June May April March February January December November October September August July June May April March February January December November October September August July June May April March February January December November October September August July June May April March February January December November October September August July June May April March February January December November October September August July June May April March February January December November October July June May March January December October September August June January December November September August July June May April March February January December November October September August July June May April March January December About BCI The Blue Collar Investor was NOT a brilliant idea of mine….

I was a frustrated blue collar investor just like you.