How To Trade Amazon Options After The Split

Shares of Amazon.com, Inc. AMZN bucked the broader decline in tech stocks, adding more than 5% to close at $2,936.35.

Amazon’s stock gained after the company surprised markets with announcements of a 20-for-1 stock split and a $10 billion share repurchase authorization.

See Also: Why These Amazon Analysts Are Bullish Following 20-for-1 Stock Split Announcement

On CNBC's "Options Action," Mike Khouw of Optimize Advisors said the stock traded more than double of its average daily volumes, representing about 400,000 contracts. “If the stock splits, the options are going to need to split with it,” he added.

Option traders would need to take the strike price and divide it by the split, Khouw mentioned. He explained with an example: If you owned a June 3,000 call, which is about a $200 option, “now you’re going to own 20 of the June 150 calls, and that’s going to be approximately a $10 option.”