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Be sure to read our Stock Splits Manual. Playing stock splits can be very profitable, but it takes know-how.

Our stock split service focuses on three main types of plays:

1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).

We play pre-split plays as short-term plays. We get in when the technical indicators show us things look right, grab as much as we can, and get out, always being conscious of resistance and support. These stocks are highly volatile at this time, and can turn on you quickly. Don’t let good profits disappear. Watch for turns, especially when a stock trades in a wide range and finishes off its high. That is a sign these stocks often give you that they are running out of steam. We usually get out and ask questions later. We can always get back in. We like to play in the money calls, preferably two strike prices in the money as this usually gives us a greater delta (the percent an option will mover versus the stock’s movement). We prefer deltas of 75 or better. This means if the stock moves 1 point, the option should move three-fourths of that point. That means up or down.

Remember, wait to see the stock start to move up. Don't just blindly make a play and don’t try to guess tops and bottoms. We can look at indicators to give us a clue as to what will happen, but we need the stock to confirm it for us. Here's a pre-split play to watch and our current analysis.

EV (Eaton Vance Corp--$52.94; +1.19; no options): Splits 2:1 effective 11-14-00.
Company Profile
STATUS: The stock has made a great move, and Friday broke out over its September high (52.06). There is additional resistance at the stock’s high of 55. Looking for more of a move as we go toward the split, and for the stock to hold at the September high when it takes a breather. Relative strength, money flow and buying are all moving up strong.
PLAY: A move up from here, with stock.

Chart by StockCharts.com

Finally, an IPO that investors could get excited about and make underwriters begin thinking about return some of their backlog of offerings to the calendar. A solid first day performance for the latest optical offering lifted hopes that the IPO market has left its dismal October performance behind.

(This IPO story is continued on our website in the IPO Forum.)