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Tesla Stock Split

Aug 23, 2022

Tesla Stock Split Explained: When Is It and How Will It Affect the Stock Price?

By:Nick Battista

  • TSLA Stock will split 3:1 as of the market close Wednesday August 24th 2022, with trading on the post split stock price effective August 25th
  • All options will split in the same 3:1 ratio and will remain standard options
  • This is not a cash dividend
  • This is the second TSLA split

When is the Tesla stock split? 

TSLA shareholders have approved a 3:1 stock split, with an ex-distribution date of Thursday August 25th, 2022. All shareholders as of the market close on Wednesday, August 24th, will be subject to the stock split.

What does the Tesla 3:1 stock split mean for investors and the stock price?

Stock splits effect both the stock price and the outstanding shares available at the market but does not add any intrinsic value. All stockholders will be issues additional shares of TSLA stock, but at a lower share price. For example, with TSLA trading at around $870, a shareholder with 1 share would now have 3 shares of TSLA stock at $290 per share post-split. Notionally, the position holds the same value, and the market capitalization of the TSLA will remain the same.

How are traders affected?

Option holders will see the same effect on their option positions, with each contract splitting at the same 3:1 rate. For example, a holder of 1 contract $870 strike put will have 3 contracts of the $290 strike put post-split. All options will continue to trade as standard options post-split. Notionally, the exposure of the position remains the same.

Tesla stock split history: how many times has tesla stock split? 

This will mark the second TSLA split, with the first split 5:1 on August 31st, 2020. Split adjust, the stock would currently be trading north of $4,300. Stock splits, while not adding intrinsic value, do add value to potential investors as lower priced shares become more accessible for a wider base of market participants, both for stock and option positions. Generally, stock splits help improve share liquidity as more shares are outstanding, which helps to reduce implied volatility. This of course, isn’t a guarantee on a day-to-day basis!

How to trade the Tesla 3 for 1 stock split 

Lower priced shares post-split greatly increases accessibility to retail traders and investors, particularly in the options as they are much cheaper (relative to a higher priced stock) with lower notional exposure. With a lower price stock, traders are able to increase exposure through naked options, or widen spreads, which will increase exposure to delta, theta, and vega, while also reducing the notional exposure of the position. Post-split, traders will have much more flexibility in terms of exposure and risk compared to the higher price pre-split stock price.

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