by wallmann
The Three Best Ways to Play Splits To Insure Greater Profits Are As Follows:

AFTER THE SPLIT ANNOUNCEMENT

Often times, the stock will develop a pattern of dropping back three to ten days after the announcement. This provides you with an opportunity to take advantage of the split announcement. If you are playing calls this is when you buy what they call “ dipping undervalued calls “. Many times you will have 2-4 chances to make this play before the stock actually splits. Just make sure you carefully observe the chart patterns to confirm that the stock is pulling back and that there is a turn back to the upside. Establish your exit points by looking at the prior highs.

PAY DATE

Historically, this play has very high odds of success and profit. If you are
playing options, this play has you buying the stock or option the day before the split. Pay careful attention to the stock pattern during the week of the stock split pay date. Hopefully, you should be observing an upward pattern or at least a sideways channeling. Your best odds are to hold the option through the split ( note: you will now have twice as many options since they also split ). Sell your options within 2-3 days of the split, your odds are better if you purchase the closest month of the “ out-of-the-money “ call.

And please remember that there will always be other plays, so if the stock is tanking one or two days before the pay day, don’t play it! Wait for the next one to come along that meets these guidelines .

POST SPLIT PLAY

Usually, the leaders in their industry group, such as Dell Computer, Intel and Microsoft, those companies that we the general public and trading institutions most easily recognize, have a greater chance of moving upward than those that do not split.

Here again, observe the charts for a long dip and profit taking before you buy long term “in-the-money” options. If you already own the stocks you can write ( sell ) “out-of-the-money“ calls to collect premiums and have good odds of being “called out“ with a nice capital gain.

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