What happens to options after a stock split?
It will be similar to what you have said -- the options price will adjust accordingly following a stock split - Here's a good reference on different scenarios - Splits, Mergers, Spinoffs & Bankruptcies also if you have time to read Characteristics & Risks of Standardized Options Since you asked about Apple, and I happen to have two positions -   This is what happened. I was long the $500, short the $600, in effect, betting Apple would recover from its drop from $700 down to $450 or so. Friday, my target was to hope that Apple remain above $600, but not really caring how much it went over. Now, post split, the magic number is $85.71. My account shows the adjusted option pricing, but doesn't yet show AAPL's new price.
No, if your stock is called away, the stock is sold at the agreed upon price. You cannot get it back at your original price. If you don't want your stock to be called, make sure you have the short call position closed by expiration if it is ITM.  Also you could be at risk for early assignment if the option has little to no extrinsic value, although probably not. But when dividends are coming, make sure you close your short ITM options. If the dividend is worth more than the extrinsic value, you are pretty much guaranteed to be assigned. Been assigned that way too many times. Especially in ETFs where the dividends aren't dates are not always easy to find. It happens typically during triple witching. If you are assigned on your short option, you will be short stock and you will have to pay the dividend to the shareholder of your short stock. So if you have a covered call on, and you are assigned, your stock will be called away, and you will have to pay the dividend. You are NOT responsible for liquidating the position.  You will either end up retaining your 100 sh. after expiration, or they will be called away automatically. You don't have to do anything.  Extending profitability can mean different things, but a major consideration is whether or not you want to hold the stock or not.  If so, you can buy back the in-the-money call and sell another one at-the-money, or further out. There are lots of options. Is my understanding correct? It's actually higher than that - he exercised options for 94,564 shares at $204.16 and sold them for $252.17 for a gain of about $4.5 Million.  There's another transaction that's not in your screenshot where he sold the other 7,954 shares for another $2 Million. What do executive directors usually do with such profit?  It's part of his compensation - it's anyone's guess what he decided to do with it. Is it understood that such trade profits should be re-invested back to the company? No - that is purely compensation for his position (I'm assuming the stock options were compensation rather then him buying options in the open market).  There generally is no expectation that trading profits need to go back into the company.  If the company wanted the profits reinvested they wouldn't have distributed the compensation in the first place. "Alternatively you could exercise 12000 shares for $36000 and immediately sell 7200 shares to recover your exercise price. Then you use the remaining 4800 share to pay the exercise price of the remaining 8000 options. Both scenarios are equivalent but may have different fees associated, so it's worth checking the fine print.  Tax wise: The above example is ""cash neutral before taxes"". The taxes associated with these transaction are substantial, so it's highly recommended to talk with a tax adviser. ""cash neutral after taxes"" depends highly on your specific tax situation." Option prices consist of two parts: the intrinsic value (the difference between the strike and the current price of the stock) and a time premium, representing the probability that the stock will end up above the strike for a call (or below for a put).   All else being equal, options decline in value as time passes, since there is less uncertainty about the expected value of the stock at expiration and thus the time premium is smaller.  Theta is the measure of the change in value in one day.  So for every day that passes, the calls you sold are going down by $64.71 (which is positive to you since you sold them at a higher value) and the calls you sold are going down by $49.04. So your position (a short spread) is gaining $15.67 each day (assuming no change in stock price or volatility). In reality, the stock price and volatility also change every day, and those are much stronger drivers of the value of your options.  In your case, however, the options are deep out of the money, meaning it's very likely that they'll expire worthless, so all you have left is time premium, which is decaying as time goes on. When dividend is announced the stock and option price may react to that news, but the actual payout of the dividend on the ex-dividend date is what you probably are referring to. The dividend payout affects the stock price on the ex-dividend date as the stock price will drop by the amount of paid out dividend (not taking into account other factors). This in turn drives the prices of all options.  The amount of change in the option price for this event is not only dependent the dividend payout, but also on how far these are in our out of the money and what there time to expiration is. The price of a call option that is far out of the money would react less than the price of a put that would be far in the money. Therefore I would argue that these two will not necessarily offset each other. Your three options are: Options 2 and 3 are obviously identical (other than transaction costs), so if you want to keep the stock, go for option 1, otherwise, go for option 3 since you have the same effect as option 2 with no transaction costs.  The loss will likely also offset some of the other short term gains you mentioned. This sometimes happens to me. It depends on how liquid the option is. Normally what I see happening is that the order book mutates itself around my order. I interpret this to mean that the order book is primarily market makers. They see a retail investor (me) come in and, since they don't have any interest in this illiquid option, they back off. Some other retail investor (or whatever) steps in with a market order, and we get matched up. I get a fill because I become the market maker for a brief while. On highly liquid options, buy limits at the bid tend to get swallowed because the market makers are working the spread. With very small orders (a contract or two) on very liquid options, I've had luck getting quick fills in the middle of the spread, which I attribute to MM's rebalancing their holdings on the cheap, although sometimes I like to think there's some other anal-retentive like me out there that hates to see such a lopsided book. :) I haven't noticed any particular tendency for this to happen more with puts or calls, or with buy vs sell transactions. For a while I had a suspicion that this was happening with strikes where IV didn't match IV of other strikes, but I never cared enough to chase it down as it was a minor part of my overall P/L. Shorting Stocks: Borrowing the shares to sell now. Then buying them back when the price drops.  Risk: If you are wrong the stock can go up. And if there are a lot of people shorting the stock you can get stuck in a short squeeze.  That means that so many people need to buy the stock to return the ones they borrowed that the price goes up even further and faster.  Also whoever you borrowed the stock from will often make the decision to sell for you. Put options. Risk: Put values don't always drop when the underlying price of the stock drops. This is because when the stock drops volatility goes up. And volatility can raise the value of an option. And you need to check each stock for whether or not these options are available. finviz lists whether a stock is optional & shortable or not. And for shorting you also need to find a broker that owns shares that they are willing to lend out. "Ordinarily a stock split increases all shareholders' share counts, so that there is no change in anybody's voting power.  For example, if you owned 1% of the company before the split, after the split you now have twice as many shares, but there are now twice as many shares outstanding, so you still own 1% of the company.  Also, stock splits are not ordinarily ""triggered"".  Usually they happen when the board decides that for one reason or another it's desirable to increase the number of shares in circulation, which causes the price of each share to decrease proportionally.   I'm not familiar with the show, and in particular I don't know what the action is that the character being addressed is thinking of taking, but it sounds like they are describing something akin to a ""poison pill"".  In these arrangements, the ""pill"" is triggered by some predefined condition, say a party acquiring shares in excess of a defined threshold.  What typically happens is that shareholders other than the ones who triggered the pill get a chance to buy shares at a substantial discount, thereby diluting the shares of the party that triggered it.  Because the other shareholders have to buy their additional shares, albeit at a discount, and because it applies only to certain shares, it's not really a split, but it's close enough that the writers of the show may have felt it was worth using the term that is more familiar to the public." For stock splits, let's say stock XYZ closed at 100 on February 5.  Then on February 6, it undergoes a 2-for-1 split and closes the day at 51.  In Yahoo's historical prices for XYZ, you will see that it closed at 51 on Feb 6, but all of the closing prices for the previous days will be divided by 2.  So for Feb 5, it will say the closing price was 50 instead of 100. For dividends, let's say stock ABC closed at 200 on December 18.  Then on December 19, the stock increases in price by $2 but it pays out a $1 dividend.  In Yahoo's historical prices for XYZ, you will see that it closed at 200 on Dec 18 and 201 on Dec 19.  Yahoo adjusts the closing price for Dec 19 to factor in the dividend. "Yahoo's ""Adj Close"" data is adjusted for splits, but not for dividends. Despite Yahoo's webpage's footnote saying  *Close price adjusted for dividends and splits. we can see empirically that the ""Adj Close"" is only adjusted for splits. For example, consider Siemens from Jan 27, 2017 to Mar 15, 2017: The Adj Close adjusts for splits: On any particular day, the ""Adj Close"" is equal to the ""Close"" price divided by the cumulative product of all splits that occurred after that day. If there have been no splits after that day, then the ""Adj Close"" equals the ""Close"" price. Since there is a 2-for-1 split on Mar 14, 2017, the Adj Close is half the Close price for all dates from Jan 27, 2017 to Mar 13, 2017. Note that if Siemens were to split again at some time in the future, the Adj Close prices will be readjusted for this future split. For example, if Siemens were to split 3-for-1 tomorrow, then all the Adj Close prices seen above will be divided by 3. The Adj Close is thus showing the price that a share would have traded on that day if the shares had already been split in accordance with all splits up to today. The Adj Close does not adjust for dividends: Notice that Siemens distributed a $1.87 dividend on Feb 02, 2017 and ~$3.74 dividend on Jan 30, 2017. If the Adj Close value were adjusted for these dividends then we should expect the Adj Close should no longer be exactly half of the Close amount. But we can see that there is no such adjustment -- the Adj Close remains (up to rounding) exactly half the Close amount: Note that in theory, the market reacts to the distribution of dividends by reducing the trading price of shares post-dividend. This in turn is reflected in the raw closing price. So in that sense the Adj Close is also automatically adjusted for dividends. But there is no formula for this. The effect is already baked in through the market's closing prices." "Great answer by @duffbeer. Only thing to add is that the option itself becomes a tradeable asset. Here's my go at filling out the answer from @duffbeer. ""Hey kid... So you have this brand-new video game Manic Mazes that you paid $50 for on Jan 1st that you want to sell two months from now"" ""Yes, Mr. Video Game Broker, but I want to lock in a price so I know how much to save for a new Tickle Me Elmo for my baby sister."" ""Ok, for $3, I'll sell you a 'Put' option so you can sell the game to me for $40 in two months."" Kid says ""Ok!"", sends $3 to Mr Game Broker who sends our kid a piece of paper saying: The holder of this piece of paper can sell the game Manic Mazes to Mr Game Broker for $40 on March 1st. .... One month later .... News comes out that Manic Mazes is full of bugs, and the price in the shops is heavily discounted to $30. Mr Options Trader realizes that our kid holds a contract written by Mr Game Broker which effectively allows our kid to sell the game at $10 over the price of the new game, so maybe about $15 over the price in the second-hand market (which he reckons might be about $25 on March 1st). He calls up our kid. ""Hey kid, you know that Put option that Mr Game Broker sold to you you a month ago, wanna sell it to me for $13?"" (He wants to get it a couple of bucks cheaper than his $15 fair valuation.) Kid thinks:  hmmm ... that would be a $10 net profit for me on that Put Option, but I wouldn't be able to sell the game for $40 next month, I'd likely only get something like $25 for it. So I would kind-of be getting $10 now rather than potentially getting $12 in a month. Note: The $12 is because there could be $15 from exercising the put option (selling for $40 a game worth only $25 in the second-hand market) minus the original cost of $3 for the Put option. Kid likes the idea and replies: ""Done!"". Next day kid sends the Put option contract to Mr Options Trader and receives $13 in return. Our kid bought the Put option and later sold it for a profit, and all of this happened before the option reached its expiry date." You could hold a long position in some company XXXX and then short your own shares (assuming your broker will let you do that).  The dividend that would have gone to you would then go to whoever is holding the shares you short sold.  You just don't get a dividend.  If you're going to short in a smart way...  do it on a stock you otherwise believe in, but use it to minimize the pull-backs on the way up. I know that in the case of cash dividends I will get the dividend as long as I bought the stock before the ex-date but what happens in the case of an stock dividend? This is same as cash dividends. You would receive the additional stock.