Managing a Position

Options FAQ: How do interest rates impact options?

Interest rates play a crucial role in options pricing, primarily through the risk-free rate, a key factor in models like Black-Scholes. But how exactly do rising or falling interest rates affect call and put options?

Options FAQ: Are there exercise restrictions when there is a corporate action?

When corporate actions occur, many investors wonder whether there will be any exercise restrictions for their options.

Corporate Actions: An Overview

Corporate actions like mergers, stock splits, spin-offs, and bankruptcies are common in today’s financial markets—but they can significantly affect the underlying securities and their related options contracts.

Corporate Actions: Mergers

Mergers, acquisitions, and consolidations can lead to significant changes in how stock and options are traded.

Corporate Actions: Bankruptcies

Bankruptcy can significantly impact both a company’s stock and its associated option contracts.

Corporate Actions: Cash Dividends

Cash dividends may seem straightforward—but their impact on options contracts is more complex. In this video, we explain how dividends influence options pricing, the role of models like Black-Scholes, and how OCC determines whether to adjust contracts.

Corporate Actions: Forward Splits

A forward stock split increases the number of outstanding shares while reducing the price per share proportionally - but what does this mean for option holders?

Corporate Actions: Reverse Stock Splits

A reverse stock split reduces the number of a company’s outstanding shares while increasing the share price proportionally—but what does this mean for option holders?

Options FAQ: Where can investors find information on corporate actions?

When an adjustment is warranted, OCC (The Options Clearing Corporation) will post all the relevant details on their website, www.theocc.com.

Dividend Considerations for Option Traders

Review possible ways dividend payments affect exercise decisions and the importance of becoming a shareholder before the ex-dividend date.

Ordinary vs Non-Ordinary Dividend Adjustments

What Are Corporate Actions?

All Cash Mergers Explained

Learn what happens to options during an all-cash merger.

Forward Stock Splits

Do you know how forward stock splits impact your option contracts? It depends on whether the split ratio is even or odd, among other factors.

Reverse Stock Splits and Strike Prices

Learn why your strike price doesn't change in reverse splits, how deliverables are reduced and the special risks of subsequent adjustments.

Trading Halts: Your Exercise Rights & Risks

Various events may lead to a pause in trading. Learn how to manage this and what it means for your position.

Credit Spread Risks, Misconceptions and Why Monitoring Matters

Capped loss does not mean small loss. This segment separates what credit spreads actually protect against from what they do not — and why placing a spread is the beginning of position management not the end.

Adjusting Your Positions to Roll with the Market

But how do you adjust your position when your opinion changes on the underlying or when things change in the market?