Impact of Corporate Actions on Options

Corporate actions, such as dividends, stock splits, or mergers, can directly affect the terms and value of an options contract. These changes are standardized and adjusted by the U.S. Options Clearing Corporation (OCC).

• Cash Dividends: Typically, regular cash dividends do not cause a change in the strike price or number of shares per contract. However, large special cash dividends (usually over 10% of the underlying stock's value) may result in adjustments to the strike price and/or the number of shares per contract.

• Stock Splits: A stock split will directly affect the options contract. For example, in a 2-for-1 split, one options contract may be adjusted into two new contracts, with the strike price halved.

• Reverse Stock Splits: A reverse stock split is the opposite of a stock split. For example, in a 1-for-2 reverse split, two options contracts may be consolidated into one, with the strike price adjusted to double the original price.

• Acquisitions or Mergers: When the underlying stock is acquired, the options contract may be converted to cash settlement or adjusted to be based on the new stock of the acquiring company.

【IMPORTANT REMINDER】 When a corporate action occurs, the value of an options contract can be significantly affected. Please pay close attention to any announcements related to the stock underlying your options. If you have any questions, please contact our customer service team promptly.