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Apple Inc. (AAPL) recently announced a 4-for-1 stock split. The split takes effect on August 31 for shareholders of record on August 24. The stock split happens automatically in your account, and United Stock Brokers does not charge a fee for this type of stock split.
If you own shares of AAPL before the Market opens on August 31, you will receive four shares for everyone you hold, and the stock price will be decreased to one-fourth of its value. For example, if you hold 100 shares of AAPL trading at $400 per share, you will own 400 shares valued at $100 per share after the split. Same as it, if you own one option call with a strike price of $400, you would own four contracts controlling 100 shares each at a $100 strike price after the split.

If you sell AAPL shares after August 24 but before August 31, you will sell them at the pre-split price. You will not be entitled to the split shares. If you buy shares after August 24, but before August 31, you will purchase shares at the pre-split price. Following the split, you will receive the extra shares resulting from the stock split.

For example: If on the last business day of trading AAPL, August 28, you sell 300 shares for a pre-split market price of $400 per share, you will receive $120,000. You will not receive any split shares.

Another example: If on August 26 you buy 100 shares (and hold them through the open on August 31) at $400 per share,you will pay $40,000. You will receive 300 additional shares after the stock split, and the price will be reduced to the post-split price.

A stock split is a type of corporate action that occurs when a company’s board of directors divides the company’s outstanding shares into a larger or smaller number of shares.

Splits are a change in the number of outstanding shares of a company’s stock without a change in shareholders’ ownership percentage. For example, with a 2:1 split, a client will receive 2 shares for each share owned before and through the open on the security’s split ex-dividend date.

There are two types of stock splits:

Forward splits are the division of the outstanding shares of a corporation into a larger number of shares. For example, in a three-for-one stock split (3:1), each old share is now equal tothree shares. The price per share would also go down. In this example, if the pre-split share were worth $9, the post-split share would be worth $3. Mostly, splits must be voted by directors and approved by shareholders.

Reverse splits are a decrease in the number of outstanding shares. For example, if you had 300 shares of XYZ and there was a one-to-three reverse split (1:3), your old 300 shares would now be equal to 100 shares. The price of each new share would also be worth more. If the pre-split share were worth $2, the post-split share would be worth $6.

When you hold a short position on a forward split stock, the shares will be debited from (NOT credited to) your account. Essentially, your short position is increased due to the split.

Fractional Shares: USB does not credit or debit fractional shares for stocks. If you receive a fractional share from a split, it will be liquidated and credited as cash to your account. Cash instead of fractional shares is often paid after the split shares are paid.

The Ticker Tape®: Slice and Serve: What Is a Stock Split & Why Do Stocks Split?

 Video: Stock Splits

Webcast: Apple Inc. (AAPL) 4 for 1 Stock Split: What You Need to Know About Your Stock & Options Positions