Discussion I saw a WSJ article today suggesting that TSLA plans to do a 3-1 stock split. When a stock split goes through, what happens to the stock's options/derivatives. Do they adjust to the new...

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Discussion

I saw a WSJ article today suggesting that TSLA plans to do a 3-1 stock split. When a stock split goes through, what happens to the stock's options/derivatives. Do they adjust to the new stock price or do they stay the same?


Another question I have is whether or not it is a good idea to short a stock that is planning on splitting. From what I recall, the purpose of a stock split is to make the stock price more appealing to a wider audience. When more and more people buy the stock, the stock price will normally increase. Is it a solid conclusion to suggest that shorting a stock during a stock split is a bad idea/investment?

Answered Same DayJun 12, 2022

Answer To: Discussion I saw a WSJ article today suggesting that TSLA plans to do a 3-1 stock split. When a...

Rochak answered on Jun 13 2022
84 Votes
Stock Split
A stock split is an activity undertaken by the company to increase the number of shares
held by current shareholders (i.e., to increase liquidity) by issuing new shares. The stock split generally goes through when the company is of the view that the price of the stock is high, and there is less liquidity.
When a stock goes through a stock split the stock’s options/derivatives adjust to the changes in price which can be due to the split, so that the value of the option and derivatives is not...
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