Apple’s 4 for 1 stock spit breakdown and how it will affect APPL stock option traders

A lot of our readers asked us to explain how Apple’s upcoming stock split will affect their portfolios. Especially those that own stock options going into Appl stock split this year 2020. 


What you should know about Apple stock split 


A few days ago, Apple Inc. (AAPL) announced a 4 for 1 stock split. The split will take place on August 31, 2020, for shareholders who own Apple stock before the end of the day on August 24, 2020. The stock split will happen automatically in your account and no additional action is required by you. Your broker-dealer is not expected to charge any fee for this type of stock split transaction.


Apple stock split explained


For every share of AAPL that you own on or before August 24, 2020, you will receive 4 shares for each share of Apple that’s in your brokerage account on Aug. 31, 2020, and the stock price will also change. Meaning, you now have one-fourth of its value. For example, if you hold 400 shares of AAPL trading at $436 per share, after the split you will own 1600 shares valued at $109 per share.   


Apple stock split in terms of Apple stock options


For example, if you own 1 stock option call controlling 100 shares with a strike price of $436, you now own 4 contracts and you are now controlling 400 shares at a $109 strike price at the same expiration date that you purchased the option at if the transaction was done before the split.


However, let’s say you sell your AAPL shares on record day of August 24, 2020, you are selling at the price before the split if you sell before August 31, 2020. As a result, you are not entitled to the split shares.


Also, let’s say you own 600 shares of AAPL before August 30, 2020, and you decide to sell on August 30, 2020. You will only receive proceeds with pre-split calculation. Again, you will not receive the split shares.  


Moreover, If you buy Apple shares between August. 24 and August 31, you will purchase shares at the pre-split price. And after the split, you will receive additional shares resulting from the stock split.  


Here is another condition, if you wait till August 25 to by 100 shares of Apple at $436 per share, you will start out getting just 100 shares since you bought before August 31, but after August 31, you will get 300 additional shares and your price per share will also be reduced. You will now have 400 shares total at $109 per share. 

Read more 

Factors That Affect The Price Of An Option Stock 

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