Lessons:"How to" properly exploit Price DROPS, in stocks Message Board

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Strategies & Market Trends : Lessons:"How to" properly exploit Price DROPS, in stocks

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To: Jim Goodman who wrote (650)	5/28/1999 7:27:00 AM
From: Early Bird	Read Replies (4) of 660

Question: What is the BEST way to exploit a POST split stock via options ? After a stock splits, I have learned NOT to adjust my charts. WHY ? To compare it to the LAST time it split, AND to observe the typical behavioiral pattern. What I have noticed is that over 95% of the time, after a stock splits, it will go into a narrow trading range for the next 40 days. This is due to many factors, not the least of which is the time it takes for the brokerage houses to receive old stock certificates, and deliver new ones. Add to this the fact that many people use this time as an opportunity to SELL and take profits (selling 1/2 of the position so that they now own the rest for free) and many others want to get in on the stock at the new post split price. So, since this is fairly predictable, WHAT is the BEST way to take advantage of these situations ? Option straddles ? Am currently tracking 33 that have split this year. Any thoughts ? EB

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