What will happen to my options when Motorola splits in 2 on Jan 4th..

beachforlife's picture
Rank: Chimp | 2

I figure all you trading pros can shed some light on this..

Do you get the benefits of a stock dividend when you only own a call option for x number of shares? Do you then control x+ dividend number of shares upon maturity of the option?

Background:

Motorola will split into 2 companies on January 4th and I'm considering buying some call options maturing after the split.

So the transaction will go down like this: prior to January 4th current stockholders will receive a stock dividend of Motorola Mobility shares (that the company splitting off) and then the old company will do a reverse stock split.

The question is once my options mature will that include control over Motorola Mobility shares that were distributed through a stock dividend?

Part 2: What happens to your options if there is a reverse stock split? Since fewer shares are outstanding does that mean you still have a contract to be able to purchase the original amount?

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Dec 13, 2010
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