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SplitTrader.com - FAQ

Got a question? The following list contains our most Frequently Asked Questions. Of course, if you can't find the answer to your particular question here, or you want to let us know what's on your mind, just hit the Contact US link and select the most appropriate contact category and drop us an e-mail.

Frequently Asked Questions

What is a stock split?
Why do companies split shares?
What is a Split Run?
If splits don't change the value of stocks in any way, how can you make money from them?
Why do you recommend exiting plays ahead of the split's payable date and a company's earnings release?
What is a Split Candidate?
What makes Split Candidates lucrative?
What is the record date? If I buy a stock following the record date, will I still receive the additional shares on the payable date?
What is the difference between the payable date and the execution date?
I receive two emails from your service every time a split is announced. Does this mean you recommend all of the stocks that are splitting shares?
Is there a difference between the Split Run / Split Candidate Lists and the Recommended Split Run / Split Candidate Lists?
Why isn't there a profile for the NASDAQ? Where can I obtain NASDAQ quotes?
Where can I find information on a stock's past splits?
My charting service indicates different prices than what I find in the split history section of your profiles. Why is this?
What is "Amateur Hour"?
What is a "stop"?
What do you mean when you say "trail your stops"?
My service does not allow stop losses on NASDAQ stocks but does on NYSE stocks. Please advise.
What happens if I put a stop order on a stock and it splits? Would my stop order then become a market order?
What is the Play-of-the-Day?
How accurately do you predict stock splits?
What are your realized returns on your play recommendations?
What is a "Play"?
Do you provide money management services?
Where can I find more information on a specific stock and details about the company?
Do you have a section where readers can go to learn more about technical analysis?
How do you calculate a stock split?
In the list of stock splits and split candidates, what does the yellow sign in the play column mean?
You often refer to stock splits in stages in your plays and elsewhere. Where can I learn about these stages?
What types of events are included in your SEC Filings Calendar?
Where can I find out about previous stock splits on specific stocks?
How do I know if a stock is optionable?
Do you offer any advice on option plays? If not, could you recommend a competent service that does so?
Why would a company announce a split with a relatively low stock price that hasn't been appreciating?
I have heard (from other sources) the effective date being used to describe the payable date, record date and the execution date. Which is it?
Where can I find information on calculating support and resistance levels for particular stocks?
What are the "Expirations by Payable Date" posted on your site every day?
Why don't you include the record dates in the profile?
If a company decides to split 2:1, how many authorized shares do they need to have?
I don't understand your plays or your results page. How do I know which stocks are currently in your portfolio?
Do you follow OTCBB stocks?
What is the purpose of the new Announced, Predicted and Expected section posted and mailed every Sunday? Which of these are you recommending as plays?

Answers

What is a stock split?

A stock split is an increase in a corporation's outstanding shares without a corresponding change in the shareholders' equity or the value of the corporation. When a company splits its stock, the share price declines by the ratio of the split. That is, a stock with a price of $100 splitting 2:1 would trade at $50 following the split (this is a simplified example that disregards typical price fluctuation). By the same ratio, a holder of the stock would possess double the shares worth half the price after the split date comes to pass. In the event of a 4:1 split, a holder of 50 shares would own 200 shares at a fourth of the price following the split, and so on. Dividends and Earnings per share also decrease proportionately following a stock split.

Why do companies split shares?

The most typical answer is to broaden a company's ownership base and increase the number of shares available for trading. For many companies, a stock split is a rational means of increasing liquidity in the trading of their stock. For example, a stock trading at $200 is difficult for many individuals to own in round lots; to own 100 shares, one would have to invest $20,000 in the company. For many investors, this is impractical or impossible. In the case of a 2:1 split, half the capital would be required to buy a round lot, whereby the "broadened ownership base" comes into play. A by-product of a stock split is often a reduction in the bid/ask spread; this further facilitates trading. There are also psychological factors involved. Many investors are unwilling to pay the "high price" for a stock and would prefer a stock that is more of a "bargain". Furthermore, since splits generally occur in the face of new highs, the split is surrounded by an array of positive associations and connotations, and can illustrate the strength of a company. Keep in mind, however, that while a stock split can bring shares to a more attractive and affordable level for investors, the intrinsic value of the stock does not change at all. There are, in fact, multitudes of companies that announce stock splits just for the "hype factor", to promote the stock through the news generated by the split announcement. For this reason, it is important to thoroughly evaluate every stock purchase. Splittrader.com has undertaken the challenge of facilitating this process and works diligently to provide subscribers with the tools they need to profit from stock splits.

What is a Split Run?

A Split Run is a stock that is in the duration of a stock split. This means the company has announced a split and the execution date still lies ahead. The Split Run is the time between the announcement date and the execution date.

If splits don't change the value of stocks in any way, how can you make money from them?

As with earnings, splits have the capability of generating enthusiasm and momentum; in fact, the two are probably the best momentum generators in the market. They provide a hook, or catalyst, for momentum traders. If you don't have one of these events upcoming, momentum traders are not likely to be found in a stock. Without positive momentum, the best stock is going nowhere or even worse, down. Generally speaking, it's the added volume and excitement that makes a stock run. What's more, volume spikes in upward price movements often indicate the momentum traders are accumulating the stock.

Why do you recommend exiting plays ahead of the split's payable date and a company's earnings release?

Because more often than not, when the date of a catalyst or trigger passes, momentum traders have already exited the stock. A momentum trader's intention is to take advantage of the momentum play offered by the split or earnings release. This exodus tends to lead to a short-term depression. As a rule, the degree a stock has advanced into earnings or a split is directly related to the degree or severity of the post-news sell off. As a result, we advise getting out just prior to the split payable date to avoid profit taking and any short-term price depression that might occur as the momentum investors exit their positions. The extent and length of any post split or earnings depression varies.

What is a Split Candidate?

Split Candidates are stocks that we predict will announce splits in the near future. Each candidate has been carefully screened for a myriad of factors that makes the stock a legitimate prospect for a split announcement. These factors include the stock's historical split price level, recent performance of the individual stock and its sector, ratio of shares outstanding to shares authorized and upcoming events that may serve as triggers to a split announcement.

What makes Split Candidates lucrative?

The period leading up to a split announcement often provides an outstanding opportunity for short-term price appreciation. When shares of a company have risen in value to the point that a split makes sense, the stock is under accumulation and enjoying momentum. When more and more people begin to realize a stock has appreciated to the point that a split seems inevitable, the momentum tends to accelerate. This is especially true when a triggering event, such as a shareholders meeting, earnings release or Board of Directors meeting is scheduled, or when a date or timeframe in which the company has historically announced a split is approaching.

What is the record date? If I buy a stock following the record date, will I still receive the additional shares on the payable date?

The split record date is the date the company uses to determine who is entitled to receive new shares of the stock when it splits on the payable date. In the past, when stock certificates were physically held and all registration was done by hand, the record date had a significant role in the process of dividends (both stock and cash). That date was used to determine who was due the dividend based on shares owned prior to that time. In today's trading environment, however, actual shares rarely change hands, instead they are accounted for electronically through a central depository. In order for an individual to take part in receiving the additional shares from a stock split, he or she must own the stock as of the close of business on the payable date. Therefore, if you buy a stock subsequent to the record date, but hold the shares through the payable date, you are due to receive the additional shares. If, however, you own shares as of the record date, but sell before the payable date, you would not be entitled to the shares generated by the split.

What is the difference between the payable date and the execution date?

On the payable date, the additional shares are issued. You must hold the stock by the close of the market on this date in order to receive the new shares. The date you see an adjustment in the stock's trading price is the execution date or "ex-date", At the market open on this date, you will see the price adjusted for the additional shares that have been issued.

I receive two emails from your service every time a split is announced. Does this mean you recommend all of the stocks that are splitting shares?

Absolutely not! Remember, not all companies are alike and split announcements do not automatically generate profits. As a site dedicated to stock splits, we believe it's our responsibility to notify our subscribers of all stock splits in a timely manner. We do this by immediately sending out a brief email "alert" when a company announces a split and follow up soon afterwards with a detailed "announcement". Splittrader's expert analysts consider a multitude of factors to decide if the stock should qualify for a lucrative Split Run Play. Play selections are published in every Tuesday, Thursday and Sunday Newsletters.

Is there a difference between the Split Run / Split Candidate Lists and the Recommended Split Run / Split Candidate Lists?

Yes! Our Split Run List includes stocks currently in the duration of their split runs (a split has been announced but not yet executed), while the Split Candidate List is comprised of stocks that we expect to announce splits or that offer potential opportunities for momentum plays. These aggregate lists are not necessarily associated with a recommendation by our analysts. Our "Recommended Split List" and "Recommended Split Candidate List" are those stocks that we are currently recommending for a Split Run Play or Split Candidate Play.

Why isn't there a profile for the NASDAQ? Where can I obtain NASDAQ quotes?

The COMPX is the recognized trading symbol for the Nasdaq Composite Index. This symbol is sometimes different depending on the quote system used because the symbol isn't standardized. The quote feed provider sets the actual symbol that their particular system designates for a specific index. An example would be Bridge vs. S&P Comstock. Both services use two different symbols for the Nasdaq Composite, as well as numerous other indices. Generally speaking, the symbols are similar, such as COMP vs. COMPX vs. COMPX.X. There is one particular quote feed that uses the symbol NASDAQ for the index (makes sense). As for the lack of a profile on our system, we don't provide a profile for the COMPX because there are literally thousands of companies underlying the index.

Where can I find information on a stock's past splits?

Enter the stock symbol in the "search for symbol" field located at the top of the SplitTrader main page. This tool will link you to the detailed company profile. In each profile in our extensive database, there is a section we call "Split History". The Split History details the date and price at the time of each split is effected by the company, the date and price at the time of the announcement (when available) as well as the split ratio.

My charting service indicates different prices than what I find in the split history section of your profiles. Why is this?

Your charting package has been adjusted to reflect the split-adjusted price. When this occurs, the chart looks to continue seamlessly, as opposed to seeing a big drop on the execution date. In the case of charting packages that do adjust for splits, such as BigCharts.com, what you see is the entire chart, prior to the ex-date, adjusted down by the ratio of the split (2:1, 3:2, 4:1, etc.). Most charts are created to do this for consistency in tracking moving averages and other indicators (e.g., the 5-dma would be severely distorted if the price weren't adjusted).

What is "Amateur Hour"?

It's often been said that amateurs rule the open, while professionals rule the close. This is an oversimplification, but certain patterns develop throughout the day, including "amateur hour". One of the best examples of "amateur hour" is the opening gap (higher or lower). Unless a gap is caused by a truly significant news event, professional traders often "fade the open". Here's an example: The NASDAQ opens 20 points higher, our target stock opens up 2 (without any great news, but maybe on an analyst reiteration of 'buy'). Amateurs rush to buy it, thinking that they are at the ground floor of a huge move up. The stock advances another 2 points, now we are up 4, while the NASDAQ is up 40, all within the first 20 minutes. Soon after, though, a resistance level is hit, buying dries up and the stock begins to retrace -- amateurs rush to get out and professionals short the stock. Soon afterwards, the stock is trading in negative territory. The opposite effect occurs on an opening gap down. Traders sell out within the first half-hour of the open, then momentum slows. Now, amateurs realize they've made a mistake and buy in once again, joined by the professionals. Often times after missing the initial run-up, traders find that a stock will either reverse direction or pause and consolidate before moving higher. The opportunity is then presented to enter the trade with a better idea of the day's support and resistance levels. This information is most relevant to traders as opposed to long-term investors, who are less concerned with daily peaks and valleys. Of course, buy low, sell high is the goal; that's why we advise buying on a move over resistance or on a confirmed bounce up from support. However, if you believe a stock is trading at an excellent level right at the open, then you should stick with your strategy and execute the trade.

What is a "stop"?

A "stop" or "stop order" is a type of order that is executed if a stock or option hits a certain price. It can be entered above or below the current price of the security, depending on the strategy. An example would be to place a stop order on a long position at $80 for a stock currently priced at $90. The strategy behind setting the stop in this case would be to protect against a reversal; in other words, you would have an order to sell the position if the stock retraces to trade at or below $80.

What do you mean when you say "trail your stops"?

A trailing stop is a variance of the "stop strategy" utilized by most traders. For example, if you own a stock that previously traded at $90, and you had set your stop at $80 and subsequently the stock has traded up to $100, you would probably want to adjust your stop. Otherwise, if the price trend reverses, you would not be stopped out until the stock had given up 20 points to trade back to $80. To avoid this, you could trail your stop by lifting the stop price. If you lifted the stop to $90, you would insure that you were stopped out at no less than $90, thereby preserving the 10-point gain between $80 and $90. If the stock continued to appreciate in price going forward, you could continue to move your stop up in correlation, thus locking in higher gains with a higher minimum sale price. Trailing stops can also be utilized in positions that have gone against you. If a stock you purchased previously had corrected with and you couldn't get out prior to the decline, you might want to employ a trailing stop if the stock started to appreciate in price again. In this case, if a stock dropped from $90 to $70, then started to go back up, you might want to employ a trailing stop to ensure that if the stock once again reversed and headed down, you would limit your loss and exposure. If the stock moved back up above $80, you might trail your stop to $75. If it moved to $85, then you might move your stop up to $80. The key to utilizing stop orders is tightness. If you keep a stop too tight, you might be swung out during an intraday dip only to see the stock trade back up later in the same day. To avoid this, you need to define good support and resistance levels for the stock and allow for normal swing ranges.

My service does not allow stop losses on NASDAQ stocks but does on NYSE stocks. Please advise.

If you can stay close to your computer and use a real-time charting service, you could keep it running on your computer (in the background). Some services offer an "alert" feature, whereby you can program specific price targets on your stocks. When the target is reached, an alarm will sound over your computer speakers.

If that's not a practical solution, you're going to have to shop around for a broker that provides an online stop-loss service.

What happens if I put a stop order on a stock and it splits? Would my stop order then become a market order?

Most investment firms will simply cancel the standing order in the event of a stock split. Normally, the stop price is not automatically readjusted for the split, so most likely you will need to place the order again after the split.

What is the Play-of-the-Day?

The Play-of-the-Day (PoD) is our favorite stock pick for the following trading day. We publish the PoD in our newsletter for each trading day (minus periods of highly adverse market conditions). A compilation of our PoD results is available on the site in the "results" section.

The direct link is:
http://www.splittrader.com/podresults/index.asp.

How accurately do you predict stock splits?

We publish a list of the successfully predicted split announcements each week in the Split Candidate's Newsletter, which also includes newly added candidates and split predictions for the coming week, on the site at

http://www.splittrader.com/candidatelist/index.asp.

Also on the site is a results page that details our accurately predicted stock splits; you can access this feature at

http://www.splittrader.com/predictions/index.asp.

What are your realized returns on your play recommendations?

As with our Candidate Predictions and Plays-of-the-Day, we have a results page that details the gains or losses we have realized on each stock we have recommended. We invite you to investigate our Play Results Page at:

http://www.splittrader.com/results/index.asp.

Please keep in mind that our focus is to provide assistance to our readers by helping them make better trading decisions. With the tools we provide, we want to help our subscribers identify profitable opportunities.

What is a "Play"?

We refer to our stock recommendations as plays, more specifically Split Candidate Plays or Split Run Plays. These are the stocks that are currently in the duration of a split (Split Run) or likely to announce a split (Split Candidate) that we feel will be appreciating, or in the case of our up and coming "Short Plays", those we anticipate a drop in price. Following the pick of a "current play", Splittrader's analysts update the recommendation three times a week with pertinent details. You can view our plays at the following locations:

Do you provide money management services?

No. We are strictly an informational service for online stock traders. We are dedicated to educating our subscribers in the proper trading of stock splits and split candidates and supplying them with the necessary tools to make their own investment decisions. We do not hold a company portfolio with the stocks we recommend.

Where can I find more information on a specific stock and details about the company?

We have a comprehensive database that contains most of the well-known companies. The company's profiled in the database include a business summary, a price graph marked with relevant events, share allocation information, a thorough split history, earnings and corporate valuation information, insider and institutional buying, analyst recommendations, any play history from past or current recommendations, plus much more key information.

Do you have a section where readers can go to learn more about technical analysis?

Yes. An explanation of technical analysis is in the Trading 101 section at:

http://www.splittrader.com/trading101/index.asp

How do you calculate a stock split?

A stock split adjusts the price of a stock by the designated ratio. To arrive at the post-split price, you divide the pre-split price by the quotient of the ratio. In the case of a 2:1 split of a $100 stock, the quotient is 2 (2/1) and the pre-split price is $100. The post-split price would be $50 ($100/2). Each shareholder will have more shares of the less expensive stock to equate the pre-split value of the aggregate shares. Each share will become the quotient of the split ratio, so in the above example shareholders would have 2 shares for each one previously held (hence the term 2-for-1 split). The total shares held by each shareholder are the number previously held multiplied by the quotient. The following common ratios effect the results described.

3:2 - 1 new share for every 2 held - Shares trade at 2/3 pre-split price
3:1 - 2 new shares for each 1 held - Shares trade at 1/3 pre-split price

In the list of stock splits and split candidates, what does the yellow sign in the play column mean?

The split sign indicates that the stock is a current play. In other words, Splittrader is presently recommending that particular stock. You can view the details of the play by clicking on the ticker link, which will take you to the profile that includes the play recommendation and history of previous play recommendations.

You often refer to stock splits in stages in your plays and elsewhere. Where can I learn about these stages?

The "5 Stages of a Stock Split" are explained in detail in the "Splits 101" segment. Click the link below to view the 5 stages.

http://www.splittrader.com/trading101/splits101.asp

There is also a link to this page in the index on the left hand side of the front page under the "Research" heading.

What types of events are included in your SEC Filings Calendar?

The SEC Filings Calendar deals primarily with shareholder meetings, particularly those being held to increase authorized shares. This is a valuable resource in predicting split announcements, as companies must have enough shares outstanding to execute a split. Other events included in the Calendar are proxies specifying plans for secondary offerings or mergers.

http://www.splittrader.com/secfilings/index.asp

Where can I find out about previous stock splits on specific stocks?

In each profile there is a "Split History" section that details past splits of a particular stock. To view this information, enter the stock symbol in the "Search for Symbol" field on the right hand-side of the main page below the NASDAQ and DOW Composite market charts. This will take you to the Company profile; the Split History section lies below the "Split Information and Share Allocation" segment. The profiles contain a plethora of data on the companies in addition to the split history; be sure to look over the entire profile for further information.

How do I know if a stock is optionable?

You can find out whether a particular stock is optionable through the profiles, indicating "Optionable" or "Not Optionable" in the top center field of the profile. Also, in the list of "Stock Splits" and "Split Candidates."

Do you offer any advice on option plays? If not, could you recommend a competent service that does so?

We do not offer options trading advice. For a more comprehensive look at options, we recommend OptionInvestor.com (OI). OI is an accomplished options advisory service that has built a reputation for clever content and sagacious option play picking.

Why would a company announce a split with a relatively low stock price that hasn't been appreciating?

Unfortunately, many companies declare splits simply to promote their stock through the news generated from the announcement. Many times these are less established businesses that yield greater risk and have little potential for stock price appreciation. Other times, companies desire to keep their price stable and therefore offer small stock splits, or stock dividends of 5%, 10% or other small increments. Banks, among other industries, are known for balancing their share price through such efforts.

I have heard (from other sources) the effective date being used to describe the payable date, record date and the execution date. Which is it?

Normally companies use the term "effective date" in reference to the execution date. It is true, however, that some releases use the term to describe the date the split is payable or even sometimes to indicate the record date. The latter is most often true for foreign companies. We try to clear up the ambiguity of such releases by directly contacting the company for identification of the relevant dates.

Where can I find information on calculating support and resistance levels for particular stocks?

Support and resistance are technical indicators we refer to often. A good charting service will be able to show this indicator on several different intervals such as monthly, weekly, daily, 60 minute and 10 minute - all of which should be taken into account when considering support and resistance. More information can be found in the Trading 101 segment of the site under the Technical Analysis categorization. The direct link is:

http://www.splittrader.com/trading101/support.asp

What are the "Expirations by Payable Date" posted on your site every day?

"Expirations by Payable Date" is a list of stock splits that are payable on that date. We post this information on those stocks with payable dates in the current or upcoming trading session. We choose to display the expirations by their payable dates because we almost always drop our plays before the split action takes place and recommend our subscribers do the same on their own split plays.

Why don't you include the record dates in the profile?

We exclude record dates because they are not pertinent to the stock split and tend to confuse traders. For more information on record dates as they relate to splits, please see the question, "What is the record date?"

If a company decides to split 2:1, how many authorized shares do they need to have?

A company needs to have at least double the amount of shares outstanding authorized for issuance. For other split ratios, necessary shares authorized are equal to the quotient of the split ratio multiplied by the shares outstanding.

I don't understand your plays or your results page. How do I know which stocks are currently in your portfolio?

Since we are an informational service only, Splittrader.com does not have a portfolio comprised of stocks we recommend. Our current plays (New Plays and Play Updates) are those stocks that we are recommending at any given time. "Drops" are stocks we no longer recommend.

Do you follow OTCBB stocks?

Only to inform our readers of a stock split. We don't recommend or provide company profiles for these stocks because of their high risk.

What is the purpose of the new Announced, Predicted and Expected section posted and mailed every Sunday? Which of these are you recommending as plays?

The Added, Predicted and Expected section relates to one of our specialties, which is the accurate prediction of stock splits. We strive to be the elite identifier of profitable split candidates. The "Added" stocks are those issues that were posted as candidates over the past week. The "Predicted" splits are our candidate picks results measured by the past week's split announcements. This list specifies those stocks that we successfully pegged as Split Candidates before the split was announced. The "Expected" segment details likely split announcements for the coming week. These stocks are solely related to our candidate picking and are not recommendation on our part. You can see which Split Candidates we are recommending at any given time through the "New Plays" and "Updates" links on the left-hand index on the main page under the "Candidates" heading or through the links below:

     


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