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Applies to US exchange listed stocks, ETFs, and options. A USD$0.65 per contract fee applies for options trades. A USD$6.95 commission applies to trades of over-the-counter (OTC) stocks which includes stocks not listed on a U.S. exchange.

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Stock Splits

Understanding stock splits

Stock splits are a unique opportunity in the market that don't come around every day. Learn more about how stock splits, including the upcoming Apple 4-for-1 stock split and Tesla 5-for-1 stock split, can affect your portfolio and investing plans.


What is a stock split

A stock split is a type of corporate action that occurs when a company's board of directors decides to divide the company's outstanding shares into a larger or smaller number of shares. Splits are a change in the number of outstanding shares of a company’s stock without a change in shareholders' ownership percentage in the company. For example, with a 2:1 split, a client will receive 2 shares for each share owned prior to and through the open on the security's split ex-dividend (or “effective”) date.

There are two types of stock splits:

Forward splits 
are the division of the outstanding shares of a corporation into a larger number of shares. For example, in a three-for-one stock split (3:1), each old share is now equal to three shares. The price per share would also go down. In this example, if the pre-split share was worth USD$9, the post-split share would be worth USD$3. Usually, splits must be voted by directors and approved by shareholders.

Reverse splits 
are a reduction in the number of outstanding shares. For example, if you had 300 shares of XYZ and there was a one-to-three reverse split (1:3), your old 300 shares would now be equal to 100 shares. The price of each new share would also be worth more. If the pre-split share was worth USD$2, the post-split share would be worth USD$6.

When you hold a short position on a stock that has a forward split, the shares will be debited from (NOT credited to) your account. Essentially, your short position is increased due to the split.

Fractional Shares: TD Ameritrade does not credit or debit fractional shares for stocks. If you receive a fractional share from a split, it will be liquidated and credited as cash to your account. Cash in lieu of fractional shares is often paid after the split shares are paid.

How AAPL's 4-for-1 stock split can affect your account

Apple Inc. (AAPL) recently announced a 4-for-1 stock split. The split takes effect on 31 August for shareholders of record on 24 Aug. The stock split happens automatically in your account and you are not required to do anything. TD Ameritrade does not charge a fee for this type of a stock split.

If you own shares of AAPL before market open on 31 Aug, you will receive four shares for every one you hold, and the stock price will be reduced to one-fourth of its value. For example, if you hold 100 shares of AAPL trading at USD$400 per share, after the split you will own 400 shares valued at USD$100 per share. Likewise, if you own one options call with a strike price of USD$400, after the split you would own four contracts controlling 100 shares each, at a USD$100 strike price.

If you sell AAPL shares after 24 Aug but before 31 Aug, you will sell them at the pre-split price. You will not be entitled to the split shares. 

If you buy shares after 24 Aug but before 31 Aug, you will purchase shares at the pre-split price. Following the split, you will receive the additional shares resulting from the stock split. For example: If on the last business day of trading AAPL, 28 Aug at 4 p.m. U.S. Eastern Time, you sell 300 shares for a pre-split market price of USD$400 per share, you will receive USD$120,000. You will not receive any split shares. Another example: If on 26 Aug you buy 100 shares (and hold them through the open on 31 Aug) at USD$400 per share, you will pay USD$40,000. You will receive 300 additional shares after the stock split, and the price will be reduced to the post-split price.

How TSLA’s 5-for-1 stock split can affect your account

Tesla Inc. (TSLA) recently announced a 5-for-1 stock split. The split takes effect on 31 August for each shareholder of record on 21 Aug. The stock split happens automatically in your account and you are not required to do anything. TD Ameritrade does not charge a fee for this type of a stock split.

If you own shares of TSLA before the market open on 31 Aug you will own five shares for every one you hold, and the stock price will be reduced to one-fifth of its value at the start of trading on 31 Aug. For example, if you hold 100 shares of TSLA trading at USD$1,500 per share, after the split you will own 500 shares valued at USD$300 per share. Likewise, if you own 1 options call controlling 100 shares with a strike price of USD$1,500, after the split you would own 5 contracts and control 500 shares at a USD$300 strike price.

If you sell TSLA shares after the record date of 21 Aug for TSLA but before 31 Aug, you will sell them at the pre-split price. You will not be entitled to the split shares. For example: If on the last business day of trading TSLA, 28 Aug at 4 p.m. U.S. Eastern Time, you sell 100 TSLA shares for a pre-split market price of USD$1,500 per share you will receive USD$150,000. You will not receive any split shares.

If you buy TSLA shares after the record dates but before 31 Aug, you will purchase shares at the pre-split price. Following the split, you will receive the additional shares resulting from the stock split. For example: If on 26 Aug you buy 100 shares (and hold them through the open on 31 Aug) at USD$1,500 per share, you will pay USD$150,000. You will receive 400 additional shares after the stock split, and the price will be reduced to the post-split price.

Why choose TD Ameritrade for stock trading

  • No subscription or platform fees - Get access to any of our trading platforms, streaming news, and expert research without an additional fee. 
  • Intelligent order routing - Enter stock orders knowing that we're committed to route your order quickly to pursue execution at the best available price.
  • Powerful stock trading platforms - Use our thinkorswim Trading Platforms to help you reach your full trading potential.

Stock Splits

Watch this video to understand what a stock split is and what it means for investors.

Now introducing commission-free trading

Applies to US exchange listed stocks, ETFs, and options. A USD$0.65 per contract fee applies for options trades. A USD$6.95 commission applies to trades of over-the-counter (OTC) stocks which includes stocks not listed on a U.S. exchange.

Connect with us on WeChat

Open your WeChat app, select "Discover," and click "Scan" to scan the QR code.

 

Or, search "TDAmeritrade德美利" in WeChat.

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