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>The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of
by adtac 6y ago
>The Board of Directors has also approved a four-for-one stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.
- meddlepal 6y agoWhat's the split price? $Close / 4?
- anthony_r 6y agoThere is no such thing as "split price". You get 4 shares for each share you previously owned, and it's up to the market to resume trading at a new level. It's a non-event, really, except it makes some operations easier.
- 3pt14159 6y agoYeah, it was getting a bit pricy to buy lots of 100 apple shares at a time and sell covered calls. This is much better. Honestly I think selling covered call on Apple is one of the few good plays left out there. Long term the company's value is going to keep going up, but with so much volatility in the market lately option premiums are bananas and though I expect a pretty dramatic stock market pullback Apple is one of the few companies that has very strong fundamentals and should weather it pretty well.
- anthony_r 6y agoAh yes, selling volatility via covered calls. The institutional investors' second favourite way of collecting "extra income" in the zero rates world, second only to explicit leverage. Some of them sold much more volatility, via variance swaps, with quite disastrous results. https://www.institutionalinvestor.com/article/b1lffwvwdh7xtq/Amateurish-Trades-Blew-Up-AIMCo-s-Volatility-Program-Experts-Say https://www.institutionalinvestor.com/article/b1lffwvwdh7xtq...
- eaenki 6y agoIt will never cease to amaze me. LTMC is my favorite story
- sbierwagen 6y agoLTCM
- 3pt14159 6y agoI mean, my family's investment company is far, far from being an institutional investor, but the math is pretty solid. If our plan is to buy Apple and sell it in the next six months if it rises by 15% then it is pretty easy to justify selling the calls with a strike at 15%, which I know isn't perfect because if something substantial changes at Apple (a new product, say) then in the case where the calls weren't sold you could re-evaluate your target, but that type of event doesn't happen too frequently and if we would have put a sell order at 15% above anyway it's a near-free increase in returns. Because inflation eats the first couple percentage points and taxes don't take that into account the delta in gains does stack up over time. Selling puts, though, is a fools game unless the market has already really tanked. Black Scholes isn't perfect, yadda, yadda.
- Calamity 6y agoOut of curiosity, what's your total return with this approach if, at expiry, the stock price matches the strike price? In other words, how much are you making with the premiums you collect? I guess one issue with this approach is that it somewhat assumes a period of low-inflation between now and option expiry (unless you're factoring that into the 15% expected return).
- 3pt14159 6y agoBecause options are at a premium right now, for the reasons stated above, running the above strategy on Apple looks like this: Buy at $400 (price at time of writing) sell an option at $460 for January which comes with a $42 premium[0] at time of writing, so if the stock goes up 15% over the six month period the total return is $102 per share, or about 25% return. If inflation is, say, 4% per annum due to Covid pushing it a bit higher than normal, then the total return is ~23% vs what would have been ~13% for doing the same play without selling the option, so the real return is around 75% higher than the alternative where the option was not sold. Usually it's around 30% more, so right now is an especially good time for this play if you think that Apple will at least hold its value. [0] https://finance.yahoo.com/quote/AAPL220121C00460000?p=AAPL220121C00460000 https://finance.yahoo.com/quote/AAPL220121C00460000?p=AAPL22...
- dastbe 6y agoPossibly, but its really however the market prices it. For example, if the theory goes that more people will want to buy apple now that the price is a "steal" (people think it's harder to 2x a big number than a small number) then it could go above that on open.
- anthony_r 6y agoBitcoin and Bitcoin Cash ? I prefer to believe that stocks are not in a bubble of such epic proportions that a stupid split can be an "event".
- johannes1234321 6y ago> Bitcoin and Bitcoin Cash ? That is the split of Google A and C some years back, where Google added a new class of shares with different voting power. In the Apple split each share after the split will be worth 1/4th, have 1/4th voting power, will receive 1/4th of dividend, etc. just reading happens in smaller fractions.
- deleted 6y ago[deleted]
- crazygringo 6y agoI'm curious. Do trading platforms automatically adjust existing limit orders the night of August 24, e.g. dividing all prices by 4? (Or just cancel all limit orders?) I mean I would assume they do, but just wonder if there are ever any severe "gotchas" with a stock split with certain existing buy/sell arrangements, or derivatives etc.
- marvin 6y agoI haven't worked on trading systems in the US, but handling this type of gotcha is the bread and butter of the sort of trading software I have been working on. There's a million tiny details like this that can cause consequences that are both different from what a customer intended and what our terms with said customer states, so making sure it's all handled in a safe way is just part of daily business.
- bollockitis 6y agoI can’t imagine working on software that could have such potentially disastrous financial consequences, so kudos to you and all of the developers who do this kind of work.
- chollida1 6y agoExchanges automatically cancel out GTC and GTD orders when splits occur. Options are also split to take the stock split into account. Trading platforms shouldn't have to do anything unless they are faking GTC orders by resending them out each day as Day orders. But if your vendor is doing that then, get a new vendor as that's completely bush league.
- pantaloons 6y agoA confusing and incorrect comment all around. Exchanges do not receive or handle GTC or GTD orders, see for example the NYSE pillar spec.[1] Broker-dealers handle stock splits and the behavior varies according to your broker. Some brokers will request the broker-dealer cancel all orders back, but most brokers allow limit prices to be adjusted for orders "below the market" (buy limit orders and sell stop orders). The Fidelity FAQ is an illustrative one.[2] I'm not sure what a "vendor" is here, but brokers send GTC orders to broker-dealers, who forward them to the exchange every day as a day order. This behavior is industry standard and certainly not bush league. [1] https://www.nyse.com/publicdocs/NYSE_Pillar_Gateway_FIX_Protocol_Specification.pdf https://www.nyse.com/publicdocs/NYSE_Pillar_Gateway_FIX_Prot... [2] https://www.fidelity.com/trading/faqs-order-types https://www.fidelity.com/trading/faqs-order-types
- cercatrova 6y agoAre stock splits necessary now that many brokerages have fractional shares? It seems the true metric is percentage gained or lost rather than the price.
- 1123581321 6y agoI don’t think splits are necessary. Fractional shares are an abstraction of share ownership though. Many people prefer not to rely on their broker for that.
- cj 6y agoOne thing to note is stock price dramatically impacts the price of options. For example 1 option contract for Amazon (over $3k share price) can easily be $4,000. In comparison, you can buy 1 option for Apple ($400) contract for $200. After the stock split, option contracts will be 1/4 the current price. Lower stock prices make the options market much more accessible to people investing less money (for better or worse).
- runako 6y agoEven more relevant for absolute dollar terms: standard options contracts are for 100 shares. So a single contract of AMZN can require $300k in cash to cover, depending on the brokerage.
- crazygringo 6y agoSo interesting that Apple does this around $400... meanwhile Amazon's over $3,000 and couldn't care less. It's very curious to me how and why different companies decide whether this is important or not.
- modeless 6y agoSeems a lot less relevant now with the rise of fractional shares.
- Cookingboy 6y agoBut not if you want to trade certain contracts positions. For example I'd like to sell some covered calls for my AMZN as a hedge against a correction later, but since I don't own $300k+ of AMZN share, I literally cannot sell a single call contract.
- rurp 6y agoI'm really surprised Robin Hood and others haven't started offering fractional options contracts yet. It seems like an obvious next step for retail trading. I'm not saying it would be a great idea or anything, just that it's going to happen eventually and being first will probably garner a fair amount of business and attention (both positive and negative).
- cj 6y agoI imagine fraction option contracts are much less practical. As an example, I’m currently holding contracts I purchased in March on SPXL and the daily volume is less than 5. With such low volume, the practicality of fractional ownership is not there.
- simonebrunozzi 6y agoBerkshire Hathaway is at almost $300k per stock.