When a stock splits, call and put options are adjusted accordingly. In almost every case the Options Clearing Corporation (OCC) has provided rules and procedures so options investors are "made whole" when stocks split. This makes sense since the OCC wishes to maintain a relatively stable and dependable market in options, not a market in which options holders are left holding the bag every time that a company decides to split, spin off parts of itself, or go private.
In general, stock dividends of greater than 10% are called stock splits and result in options splits or adjustments. For example, a 100% stock dividend is the same as a 2-for-1 split. Stock dividends of 10% or less do not result in any options adjustments. Just to be clear about the notation used here, a split of 2:1 or 2-for-1 means for every 1 share before the split, after the split the holder has 2. Similarly, a reverse split of 1 for 4 or 1:4 means for every 4 pre-split shares, the holder has just 1 after the split.
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In general, stock dividends of greater than 10% are called stock splits and result in options splits or adjustments. For example, a 100% stock dividend is the same as a 2-for-1 split. Stock dividends of 10% or less do not result in any options adjustments. Just to be clear about the notation used here, a split of 2:1 or 2-for-1 means for every 1 share before the split, after the split the holder has 2. Similarly, a reverse split of 1 for 4 or 1:4 means for every 4 pre-split shares, the holder has just 1 after the split.
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