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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.

UNH(United Health--$115.06; +2.37; optionable): Announced a 2:1 stock split, effective December 22.
Company Profile
STATUS: After pulling back Wednesday the stock again held support at its 18 day MVA (112.08) for a push back up Friday, staying in the range of its recent consolidation as the stock moves in what appears to be an ascending wedge. The stock reached up to a high of 117.94 last week, and we will look for the stock to move over that level for positions.
BUY POINT: A move over 118 on volume in the 1.5 million range.
POSITION: Stock and/or January $115 calls to buy (UNH AC).

Chart by StockCharts.com

BCGI - Bed Bath & Beyond is trading at $21 3/8. The Dec 20 puts (BHQXD) are currently trading at $1 1/8.

Chart by StockCharts.com

As volatility rolls through global markets, the latest ADR offerings are getting swept along for the ride. The last 15 ADRs to price are down an average of 15% with most between 5% and 40% below their offering prices.

ADRs typically track the shares trading in the company’s home country. That eliminates arbitrage opportunities and leaves ADRs to react to domestic political problems such as the violence in the Middle East or the leadership crisis in Taiwan. Meanwhile in the U.S. the uncertainty of the undecided presidential election has depressed the Dow and the Nasdaq. Perhaps it is more valuable to see how the individuals fared in the broader markets after opening day.

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