Keep in mind that one options contract represents 100 shares of the underlying stock. But in a 3-for-2 split, a contract is adjusted to reflect 150 shares of the underlying stock. Meaning, you had a 100% position when you started.

But now that you hold one extra option for every two you already had, you now have a 150% position.

This is called the "deliverable"—that is, when you exit the trade, your position either reflects 100 or 150 shares and must be settled, or delivered, accordingly.

The Pie Is Still the Same Flavor...Only the Slices Are Smaller

For example, last year California Pizza Kitchen (CPKI) shares split 3-for-2, which meant that stockholders received one extra share for every two common shares they owned.

The stock closed slightly below $34 before the split; it opened up at $22.52 after the split was complete.

So, if you owned two shares for a nearly $68 value, then three shares at the adjusted price would equal your original investment capital.

As for those who invested in CPKI options instead of the stock, they received equal treatment, although the math is a little more complicated. For example, the stock closed at $33.99 the night before the split became effective, so someone who was holding two CPKI call options at the $35 strike price, for example, became the proud owner of three calls at the 23-3/8 strike (or $23.375).

The math is pretty simple when you remember that the delivery multiple increases from 100 shares to 150 shares in the 3-for-2 split.

Applying it to the "old" $35 strike price, what you do is divide the strike price by that 150, or 1.5, which gives you 23.333333333333332, which is then rounded to 23- 3/8 because, let's face it…