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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Dan Duchardt who wrote (11512)9/10/1999 6:29:00 AM
From: Greg Higgins  Read Replies (1) of 14162
 
Dan Duchardt writes: I'm confused. What am I missing here?? I read the article about the split "in the form of a 100% dividend". Suppose I had bought 1000 shares of ROST before September 7 at around $41_1/2. Then a few days later (like today), I sold it at $40_1/2. Since I owned it on September 7, is this saying that come Sept 22 I'm going to receive 1000 shares of ROST, which will be worth at that time around $20 per share, plus the dividend? How can this be? If this is the case, anyone buying ROST now would be absolutely out of their minds!!

When you sell your shares, if you sell at 41 1/2, then the right to receive the dividend is sold along with the stock. If you sell at a post split price of 20, then the right to received the dividend is kept by you. All of this is taken care of by the Clearing Houses and while they can make an error, they're really quite good at keeping things straight. Since so few people actually take possession of certificates these days, this is usually not a problem.

However, if you did have possession of your certificates, and if you sold them at the presplit price, when your new certificates were mailed to you, your broker would be expected you to endorse them over to them for transmittal to the buyer immediately after you received them.
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