What is a Spin-Off Corporate Action? Calculate Prices | Tradestops What is a Spin-Off Corporate Action? Calculate Prices | Tradestops

# What is a Spin-Off Corporate Action? Calculate Prices

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• What is a Spin-Off Corporate Action? Calculate Prices

A spinoff is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company.

Currently, the Entry Price will be adjusted for spin-offs only if the “adjust alerts by dividends” setting is set to “Yes.”

TradeStops will also adjust your Cost Basis by the spinoff and add a manual position for the spin off company automatically with a weighted Entry Price. Your gains calculations will correctly reflect the spin off adjustment.

If a position has a spin off, we will use the following approach for:

##### LONGS:

Spinoff Adjustment factor for old shares= (1- Latest Close of newly issued Shares on the previous trading day) / Latest Close of old shares on the previous trading day

Spinoff Adjustment factor for newly issued shares=1-Spinoff Adjustment factor for old shares

##### Example:

User Purchased 1 Share of GOOGL in 2013 at \$1000.

On 04/03/2014 as a result of spinoff he got an additional share of GOOG.

The market close price of GOOG on the previous trading date, i.e. 04/02/2014 was \$567

The market close price of GOOGL on the previous trading date, i.e. 04/02/2014 was \$1135.10

Spinoff Adjustment Factor for old shares=1- \$567/\$1131.1=0.500485

Spinoff Adjustment Factor for newly issued shares=1-0.500485=0.499515

GOOGL entry price will be adjusted the following way:

GOOG adj entry price=\$1000* (1-0.5004845)=\$499.51. This position will be added automatically (for manual portfolios) or will be synched from brokerages (synched portfolios).

##### SHORTS:

Currently, we do not adjust Short Positions by Spinoffs.

##### Example:

If you opened a Short position for 1 Share of GOOGL in 2013 at \$1000.

On 04/03/2014 as a result of spinoff shareholders got an additional share of GOOG. The Market Price of GOOG on the previous trading date was \$567.

GOOGL entry price will be:

This position will be added automatically (for manual portfolios) or will be synched from brokerages (synched portfolios).

##### SHORTS:

Currently, we do not adjust Short Positions by Spinoffs.

##### Example:

If you opened a Short position for 1 Share of GOOGL in 2013 at \$1000.

On 04/03/2014 as a result of spinoff shareholders got an additional share of GOOG. The Market Price of GOOG on the previous trading date was \$567.

GOOGL entry price will be: