Stock Splits and how you can profit from it!
When a company’s stock prices goes to all time, it splits to make it easier for people to buy. So for example when Apple stock goes to around 90 (typically), the company announces a 2 for 1 stock split; basically you get 2 stocks for every stock you own. So if you own 100 stocks before the split, you will have 200 stocks after the split with each stock worth $45.
So what is the great thing about stock splits? Usually the stock that split tend to appreciate in price rapidly compared to other company stocks. For example when Apple splits last time, it has almost doubled and now nearing the same peak.
If you invest on stocks that are about to split, you will most probably be a winner. You can also play your options skill for stocks that are going to split. When stock splits, options also splits. For example if you have an option for Apple stock for $90 expiring in Jan 2008, after the split you get 2 options with a target price of $45 expiring in Jan 2008. The returns on options is spectacular on stock splits .
There are many websites offering “prediction” on stock splits based on the history. One of the website I use is www.stocksplits.net. It is expensive though (about $90 per month) but worth even if you make money on one stock.
Good luck on your investment and feel free to contact us for any questions.
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