If you own options on a stock that was adjusted due to a stock split, merger, spinoff or other corporate action, you will notice a few differences.
- The stock ticker will have a number added to it. For example, if you own an options contract for XYZ, after it executes a 1:5 reverse split it will appear as XYZ1.
- You won’t be able to see this new ticker symbol in the app unless you owned the option before the corporate action.
- You won’t be able to buy this new ticket (XYZ1), but if you own it already, you can sell or exercise the options contract.
- Stocks that are held as collateral on options will also undergo the same corporate action
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Options Disclosure Document. Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.