Stock split


  • The stock split is the opposite of a stock grouping. It involves an increase in the number of shares in circulation, which are replaced by new shares according to a set ratio. At the same time, the price must decrease in an inversely proportional way to the increase in the number of shares.

    With a 3 for 1 stock split, each shareholder is assigned 3 "new" shares for each "old" one handed back.

    Borsa Italiana calculates the adjustment coefficient according to formula 2. This value, always with 6 decimal digits, is multiplied by the strike prices (daily closing prices) and divided by the lot.

    Consequently, stock option contracts (stock future) subject to a stock split will see a change in their strike prices (daily closing prices) and lot size.

    Formula 2.

         V
    K = --------
         N

    where:

    • V = number of old shares
    • N = number of new shares

    Impact on derivatives contracts

    Adjustment of the strike price (daily closing price):

    Eex = Ecum x K

    where:

    • Ecum = strike price (daily closing price) before the adjustment
    • Eex = strike price (daily closing price) after the adjustment

    Adjustment of the number of underlying shares (lot):

                        1   
    Aex = lot x -----
                         K   

    where:

    • Aex = number of underlying shares (lot) after the adjustment

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