GOOG – Get Ready for Next Week’s Split

Split? Dividend?  Confusion for Google ($1129, up $14.72) investors is what’s coming up.

CBOE RS (Research Circular)  # 14 – 154 is the document you need to be aware of.  If you trade GOOG options, It is VERY IMPORTANT.  Here’s the link:

http://www.cboe.com/publish/ttstocksm/14-154.pdf

GOOGLE has declared a special stock dividend to holders of Class A and Class B shares.  The payable date is April 2nd, that’s next Wednesday, The Ex-date for the distribution will be Thursday April 3rd.  Shareholders of 100 shares of Class A or B stock will get 100 shares of Class C (this is a new class) stock.

Here’s where the fun begins.

The new Class C shares will use the symbol GOOG, the old GOOG (Class A shares) will use the symbol GOOGL.

What happens with GOOG options?  On Thursday, April 3, 2014, trading in GOOG option series will be on an adjusted basis.  An investor who was long one GOOG June 1000 strike call will now own (explained in the Research Circular) one GOOG1 (that’s a number one after the GOOG symbol).  Why?  The GOOG1 option holder is entitled to 100 shares of the old Class A, AND 100 shares of the new Class C shares. A seller of an old GOOG option has an obligation for Class A & B shares.

As a floor trader, (e.g.) we saw the occasional investor who was long or short an original GOOG option, close (at least they thought that was what they were doing) their position by buying or selling a GOOG option.  One would have to buy or sell a GOOG1 to close.

In an unrelated area, GOOG Class A & B shares will remain in the S&P 100 (OEX) and S&P 500 (SPX).  A different index will use the Class C shares in their calculation.

So if you have a GOOG option position, here’s what I’d recommend – strongly.  Look as the attached Circular.  If you have any doubt as to what’s going on, contact your broker.  They do not want you trading the wrong product, and ending up with a long or short position you do not want.

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Marty Kearney

Mr. Kearney began his long association with the CBOE when he became an independent Market Maker in early 1981. Mr. Kearney traded options full time on the trading floor until 1992 and periodically thereafter until 1996. In early 1992 he became a founding partner and Registered Options Principal of a brokerage firm based in…