Calculating Stock Splits: A Step-by-Step Guide (2024)

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Strange split

Buy 1 ABC Jan 50 call

divided 3:2.

1. Exercise value: Number of shares X exercise price = 100 shares x 50 = $5,000
2. New number of shares = 100 X 3/2 = 150 shares
3. New exercise price= exercise value/ new shares= $5,000/ 150= $33.33

1 ABC January 33.33 for 150 shares

These are the tough ones because the example above is an unequal distribution. When we make adjustments for splits, the first step is to calculate the strike value and then the new number of shares. To calculate the new number of shares, take 100 and multiply it by 3/2. This applies not only to options, but also to ordinary shares.

How to find the strike price

To find the new strike price, we take the strike value divided by the new shares. Therefore, we see that it will be 5,000/150, which is equal to $33.33. We now have an ABC 33.33. January call for 150 shares, a non-standardized contract. Please note that the number of contracts is the same, then you need to find out the training value first. First you enter the strike value, then the new number of shares and then the new strike price.

Even split

Buy 1 ABC Jan 50 call

3:1 Split

1. Exercise value = 100 X 50 = $5,000

1. New number of contracts = 1 x 3/ 1 = 3 contracts (so 300 shares)

1. New strike price = $5,000/300 shares = 16.67

3 ABC Jan 16.67 call

A similar example, now we have an even 3:1 split. The only difference in this example is that in the first, step two, you discover the new number of shares. In step two of the even distribution you calculate the new number of contracts. Therefore, even splitting means ending in one.