Re: Option with underlying split
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Posted by Mark
on August 07, 2005 at 14:19:03:
In Reply to: Option with underlying split posted by Chris ß on August 07, 2005 at 11:58:23:
: Hi Mark, : 1st, just a 1 liner to THANK YOU for the GREAT Support .: If I sold a naked PUT on an equity that later split, the option incurs a distribution to reflect the new number of Puts. : So, I sell 10 PUTS, the underlying splits 2 for 1, so my origianl sale of 10 PUTS goes to 20 PUTS. : What is the best way for FM to handle this? : TIA for your patience and help. Maybe your reply could be included in the Options FAQ page. : Obviously, I'm doing my 2004 taxes! based on an extension.... : -= Chris ß =-
Hi Chris,
Thanks for the positive comment on the support, glad to hear that! I'm not an expert on PUTS, so take this with a grain of salt... :) Why is the split in the underlying stock recorded as a distribution in the option, rather than a split? When the underlying stock splits 2 for 1 doesn't the strike price get cut in half and the number of options doubled? If so, it seems you would just record a split in the PUTS investment, and then handle it normally after that. Even though you own a negative number of these options, a split will still work as desired. I'm sure you've seen this, but here it is for reference to others: http://www.fundmanagersoftware.com/sellput.html Thanks,
Mark
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Mark Beiley
Fund Manager, portfolio management software for Windows 95/98/ME/NT/00/XP/2003
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