Splits occur on stocks if the company wishes to lower the cost per share to make the stock more attractive to investors. When this happens, the number of shares increases, but the price per share is reduced. Reverse splits can also occur to increase the price per share.

If you enter a position which you have purchased in the past and there were splits since the purchase date, the following formula will be applied:

LONGS:

Entry Price Adj= Entry Price * SplitAdjustmentFactor

Shares=Shares * (1 / Split Adjustment Factor)

SplitAdjustmentFactor=Number of Old Shares / Number of New Shares

Example:

Entry date=01/01/2014, Entry Price=$100, Shares=10, Split Occurred 1:2

Calculations:

SplitAdjustmentFactor=1/2

Entry Price Adj=$100*1/2=$50

Shares=10*2=20

SHORTS:

Entry Price Adj= Entry Price * SplitAdjustmentFactor

Shares=Shares * (1 / Split Adjustment Factor)

SplitAdjustmentFactor=Number of Old Shares / Number of New Shares

Example:

Entry date=01/01/2014, Entry Price=$100, Shares=10, Split Occurred 1:2

Calculations:

SplitAdjustmentFactor=1/2

Entry Price Adj=$100*1/2=$50

Shares=10*2=20

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