Not a comment about the stock price increase due to splits, but very high stock prices are an issue for employee stock purchase plans (ESPP): they can't offer fractional shares and they need to round down.

If you set aside 15% of a gross salary of $100k for 6 months, that's $7500. When the stock is at $1000, you get 7 shares. If the stock is $100, you get 75 shares. The lower your income, the more you miss out on ESPP that way.

It's not a huge deal if the stock is flat (you only get a 15% discount), but for a fast appreciating stock, those additional 5 shares can be real money.

You can’t buy options on a $1000 stock, the notional amount for each contract would be $100k

>You can’t buy options on a $1000 stock

Yes you can.

Thanks for your pedantic contribution. I obviously mean you can’t buy them on a small account. You can by a fraction of an NVDA share with $200 but you can’t buy a call option

You quite literally can; a $1000 strike call contract on NVDA 2-DTE is <$2000

$1140 strike is <$200

(before markets closed today obviously)

Man.. this forum is something else

It quite literally is not something else

I heard they are also announcing a 10 for 1 stock split, which would really help the option cost too due to the share price going to about $100

Call / put spreads work

aaaand? why should you be able to? get a bigger account if you want to play around with 1k stocks.

Stock price is completely arbitrary. AMD could have 5 digit share prices if it did reverse splits.

Somebody think about the casinos!

Yep. It is really hard to trade options even for hedging when the notional is so high. Of course you can do combinations of strategies to lower the upfront but I imagine many brokers might just not give the credit worthiness or permissions for that. Don’t know why your were downvoted. Unless I miss something obvious, as well.

I think it mostly just opens the door to retail investors with a smaller account. The announcement of a stock split by itself create that expectation and drives the price up.

Options strategies also become more accessible and the leverage of one-cent differences increases dramatically

One of the primary reasons companies split their stock is to keep the price in a more natural trading range where there's likely to be more liquidity.

An n-way stock split in theory should reduce the price by a factor of n (that is, a 2:1 split ought to halve the price) but what we're seeing now is likely just price discovery based on the bullish earnings report.

Many people around the world can invest only small amounts per month. A 1000$ price makes the entry high.

Only some trading platforms allow for buying of fractional shares.

The underlying logic is that lower per share price would increase volume and maybe a bit the price.

Makes options more accessible. It also an additional signal of bullishness from the company.

Before partial shares and odd lots, it also let less money buy the stock.

maybe allows more retail investors to buy? hypothetically fractional shares solves this but i bet in practice, not many folks buy fractional shares.

That's about the only 'rational' explanation I can think of - but I suspect that's really small money overall - it's not people who can only afford to buy 50$ that will drive up the price ?

Or maybe the actual number is x10 - since we don't want to buy just 1 share, and the real minimum is 10 shares ?

Remember this McDonald's billboard saying "Hey Crypto Bros, we're hiring"? :)

Many individual investors are people who only have like 100-200 USD per month to invest through Robinhood. Or they do have some 401k plan where they get like $400 monthly.

The underlying mechanism is that supply (of stocks) will decrease. The boost in prize is an anticipation of the result.

In poor economic theory, there shouldn't be any change, but if you consider behavioral economics, and regulations that introduct inefficiencies it explains the change in price.

It also communicates to investors (through action) the plan, apetite for risk, and investment opportunities (for the company) moving forward.

That's not at all how stock splits work. You're probably confusing them with buybacks.