When a stock splits, the share price drops to a more manageable level for most of us. In the case of a 2-for-1 split, the stock that's worth $100 per share will be broken in half. So, the long-side investor who holds one share at $100 now has two shares at $50 apiece.

Of course, the intrinsic value of the stock has not changed a bit. But, the psychological effects of the stock split will, more often than not, increase the stocks popularity not only on Wall Street, but also on Main Street.

The average investor can afford to get in on the action, and the institutional folks get twice as many shares, increasing a stocks liquidity. It's a win-win all around…especially for options traders.

Leveraging the Stock Split

So what does a stock split mean for the down-and-dirty options trader in the trenches of puts and calls?

It's all about the delivery. See, as explained above, the original dollar amount doesn't change, but your delivery gives you additional leverage. And options traders love leverage.

If you've got 10 contracts of the XYZ Aug 60 Calls and the stock splits 2-for-1, you'll get twice as many calls at the lower strike price, or 20 contracts of the XYZ Aug 30 Calls, on a split-adjusted basis.

Keep a keen eye on those ticker symbols: It's technically a "new" option, your position will be given a new ticker symbol because the stock is now trading at $30 and there would be no need to have options with the $60 strike be available for trading after the stock split.

If you're establishing an options position after a split has taken place the tickers and values will have already been adjusted to reflect the change because the "old" strike prices have been taken off the board as of the effective distribution date.

Now, those are "easy" examples, in that the stocks split evenly and it was simple to see what they would become. But in the case of a 3-for-2 split, calculating the delivery is a little trickier…