The Options Box

[Bird of Prey]

>>Do you usually hold the option until after the split or sell into the rally Before the split happens? Any information or strategies that you have to share are Much Appreciated!


Books have been written on this subject. For a novice I would suggest Wall Street Money Machine by Wade Cook. For the more advanced student I recommend McMillan on Options.

To try and sum it up though. If you have bought in time to benefit from an announcement of a split you can just about decide to sell it anytime during the cycle and profit.
This is the cycle.

1. preannounce
2. announcement (rally follows)
3. Lull following announcement rally (buying opportunity)
4. Presplit rally
5. split
6. post split *

Holding after the split can be tricky. Some companies continue the upward trend, some don't. I have only found one consistant result from spliting their stock. Disney. It always drops after a split.
Usually though if the company has good fundamentals it will continue to rise post split as it did before the split was announced. Be wary however of companies that are splitting a second time in 12 months. You can get burned.

The Bird of Prey