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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Joss who wrote (56120)	4/15/1999 12:23:00 PM
From: Don Lloyd	Read Replies (2) \| Respond to of 132070

Joss - (Assume a 2:1 split. Original strike 100. You now have 200 share option to maintain your volatility, HOWEVER, your multiplier for pricing the worth of the option is still 100. The strike is still 100 for you. So take the stock price, double it in this case and see how well you are doing. It is done this way to maintain the volatility of the original purchase which would not be the case if they just gave you a new strike of 1/2 the original option strike.) While anything is possible, this sounds wrong for a simple 2:1 split. My experience is that 10 option contracts with a strike price of 100 each representing 100 shares pre-split will turn into 20 option contracts with a strike price of 50 post-split and will still represent 100 shares. However, nothing is certain and it is routine to get bad symbol and strike data from even the CBOE, and that doesn't even address the detailed contract terms. Volatility is a function of percentage changes in the stock price and is not theoretically affected by splits. OTOH, human nature and spreads will likely produce different action post-split. Regards, Don