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What happens to your options in a split, buyout or spin-off?

When a company splits its stock, gets bought, spins off a business or goes bankrupt, your options don't vanish. The contract is rewritten so the event itself doesn't make either side richer or poorer. What can still hurt you is the price move around it, and an adjusted contract that's hard to trade.

Options guide · 14-minute read · Updated 2026-10-28

The one rule behind every adjustment

Every listed US option is cleared by the OCC, the Options Clearing Corporation. When a company does something that changes its shares, the OCC decides how the option contracts change.

The goal is always the same: the event itself should not move money from one side of the contract to the other. If you sold a call, a split should not hand the buyer a gift. If you bought a put, a merger should not wipe you out on a technicality.

So the OCC changes what the contract delivers. Sometimes that means more shares, fewer shares, another company's shares, cash, or a mix. In most events the strike and the number of contracts stay the same, and the contract gets a new symbol with a number on the end. Whole-number splits like 2-for-1 are the main exception: you get more contracts at a lower strike.

That rule protects the math on the day of the event. It does not protect you from:

• The stock moving. A buyout can jump the stock past your strike. A broken deal can drop it far below.
• Thin trading. An adjusted contract can be hard to sell at a fair price.
• Plans that need 100 shares. A covered call, a cash-secured put and the wheel strategy all depend on clean 100-share lots. Some events break the lot.

This page is the map. Each section links to a page that works one event out in numbers.

Every event at a glance

Here's what each event usually does. The exact terms for any real contract are in the OCC's information memo for that event.

The words "usually" and "often" matter. Each event is handled one at a time. Two buyouts can be adjusted in two different ways.

Splits and reverse splits

A forward Stock split gives you more, cheaper shares. A 2-for-1 split usually doubles your contracts and halves the strike. An odd ratio like 3-for-2 can leave you with a contract that delivers 150 shares instead. I cover that in I sold options on a stock about to split.

A reverse split is the opposite, and it causes more trouble. A 1-for-10 reverse split turns 100 shares into 10. Your option still says the same strike, but now delivers only 10 new shares. That contract becomes a Non-standard deliverable and trades under a new symbol.

• What happens to my options in a reverse split? has the before-and-after contract table.
• Reverse split left me with odd shares covers the wheel problem: 10 shares can't back a normal covered call.
• Why does my option symbol end in a 1? explains the new name.
• Adjusted options explained shows how to read any adjusted contract.

Buyouts and mergers

How a buyout hits your options depends on how the buyer pays.

All cash. When the deal closes, each share turns into a set amount of cash. Options on it usually get an Accelerated expiration: they end early and settle for their Intrinsic value only. Time value disappears.

• Covered call when the stock gets bought out: your shares are cashed out and your gain stops at the strike.
• Call options in a cash buyout: why a call can lose money even when the deal price is above its strike.
• Short put when the stock gets acquired: the seller's side.

All stock, or cash plus stock. The contract is adjusted to deliver the buyer's shares, or a mix. It keeps trading until its normal expiry.

• Options in a cash-and-stock merger values a mixed deliverable step by step.
• The adjusted option deliverable calculator adds up shares and cash for you.

Before the deal closes. The stock usually trades in a tight band just under the deal price. That changes what selling options on it means.

• Selling covered calls on a buyout target: why the premiums shrink and what you give up.
• The buyout fell through: when the deal breaks, the stock often drops back toward where it was before.
• Covered call and a tender offer: what happens if you tender shares that have a call written on them.

Traders sometimes buy shares in a pending deal to earn the gap to the deal price. That's called Merger arbitrage. The gap is small because the market is pricing in the chance the deal fails.

Spin-offs, special dividends and holidays

Spin-offs. A company splits off part of its business into a new company. Shareholders get shares of the new one. Your option is adjusted to deliver both: the parent's shares plus the new company's shares. See what happens to my options in a spin-off, and the Spin-off glossary entry.

Special dividends. A regular quarterly dividend doesn't change your contract. A large one-time special dividend usually does: the strike is reduced by the dividend amount, so neither side gains. Smaller special dividends may be left alone, and that's when early assignment risk shows up.

• Special dividends and option adjustments explains when the strike is cut and when it isn't.
• A special dividend hit my covered call works one example.

Holidays. When a regular Friday expiry lands on a market holiday, such as Good Friday, the options usually expire on the trading day before. That's one less day for your plan. See options expiring on a market holiday.

Delistings and bankruptcy

When a stock is removed from its exchange, its options don't vanish. They usually become closing-only: you can close a position you already have, but nobody can open a new one. They can still be exercised and assigned until they expire. See Closing-only options and what happens to options when a stock is delisted.

Bankruptcy is the event where short puts get hurt the most. If you sold a put and the stock falls close to zero, you can be assigned 100 shares at your strike. The premium only softens that slightly.

• What happens to my options if the company goes bankrupt?
• Short put if the stock goes to zero: the real loss works the worst case.

A Trading halt is different. The stock pauses, often right before big news like a deal. Options pause too. See the stock got halted.

A worked example: the event is neutral, the price isn't (hypothetical)

This is an illustration, not a trade idea. XYZ is a made-up stock.

XYZ trades at $40. A buyer offers $50 a share in cash. XYZ jumps to $48 and sits there.

You think: "The buyer pays $50. A put at $45 can't go wrong." You sell one $45 put for $0.50 and collect $50. Your broker sets aside $4,500.

The premium is small because the market knows the deal could fail. Here's every ending.

Look at the shape. One row earns $50. Four rows lose, and the worst shown loses 29 times the premium. The deal didn't have to be likely to fail for this to be a bad trade. It only had to fail once.

The OCC rule did its job in every row. Nothing about the contract moved money between you and the buyer. The loss came entirely from the stock dropping when the deal broke.

That's the lesson of this whole section: adjustments are fair, but the events that cause them move prices fast. A short put or covered call on a company with news pending is a bet on how the news ends.

How to find your contract's real terms

1. Look for the OCC information memo. The OCC publishes one for every adjustment. It lists the new deliverable, the new symbol, the effective date and any cash. Your broker can point you to it. See how to read an OCC information memo.
2. Check your broker's position screen. Many show the deliverable on the contract detail page. If it says something other than "100 shares," you have an adjusted contract.
3. Do the math yourself. Add up what the contract delivers at today's prices and compare it with the strike times 100. Don't trust an "in the money" label on an adjusted contract.

What to do, before and after

Before you sell an option:

• Check for news that could trigger an event: a pending deal, a shareholder vote on a reverse split, a planned spin-off, a large special dividend.
• If something is pending, decide whether you'd still sell the option if the event happens tomorrow. Write the outcome table first.
• Size every short put as if the stock could fall far. On the wheel strategy, that is your main defence.

After an event hits:

• Find the memo and work out what you really hold.
• If the contract is adjusted, plan to close it with a limit order rather than trade it further.
• If you were assigned something other than 100 shares, decide what to do with the odd lot before selling anything new.
• If you're unsure what showed up in your account, our assignment guide walks through what normal assignment looks like, so you can spot what's different.

Glossary entries for this section: Accelerated expiration, Non-standard deliverable and Closing-only options.

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