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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.

USPH (U.S. Physical Therapy--$28.56; +4.06; no options): Splits 2:1 effective January 8.
Company Profile
STATUS: Well, USPH is a classic example of how a good pattern, even if is a bit ragged, and even if the sector stinks, can give you a great play. Patterns are key, and we missed playing it. The stock broke out of its cup-with-handle, blasting up off of Thursday’s doji at the top of the pattern. We are getting the split Monday, and could get a pullback (too extended to try to catch it here) where we could take positions on a successful test of the 25 level.
PLAY: A move up on continued solid volume (way up at 210,900 Friday; average 36,300) after a test of the 25 range, with stock.

Chart by StockCharts.com

WMS - WMS Industries is trading at $18 11/16. The Feb 17.50 puts (WMSNW) are currently trading at $1 5/16.

Chart by StockCharts.com