What Is Adjusted Option? Definition & Example

Why It Matters

Adjusted options look like normal options but have non-standard terms. Trading them without reading the adjustment memo can result in unexpected deliverables, wrong position sizes, or pricing confusion.

How It Works

After a corporate action (split, special dividend, merger), the OCC adjusts affected options. The strike, contract size, or deliverable may change. The adjusted contract trades alongside new standard contracts on the same underlying.

Example

AAPL does a 4:1 split. Your pre-split $600 call becomes a $150 call controlling 400 shares (4 contracts of 100 shares each). Same economic exposure, different terms. New post-split standard contracts are also listed at $150 with 100-share size.

Common Mistakes

Trading adjusted options thinking they're standard. An adjusted contract might deliver 150 shares + $200 cash instead of 100 shares. Always read the OCC adjustment memo before trading or holding adjusted contracts.

Related Terms

DTE (Days to Expiration)

Enter at 30–45 DTE for optimal theta/gamma balance. Close or roll at 21 DTE or 50% profit — whichever comes first.

Assignment

Not a disaster — it's the plan in the wheel strategy. If you only sell puts on stocks you'd own, assignment is just the next step.

Roll (Rolling)

Roll for a net credit or don't roll at all. Rolling for a debit just delays a loss. Best done before the position goes deep ITM.

Annualized Return

Looks impressive but is misleading if you ignore losses. Track actual account returns, not annualized returns on winners only.

Breakeven

Always know your breakeven before entering. If the stock can realistically reach it, either widen the margin or skip the trade.

Bid-Ask Spread

Wide bid-ask = hidden cost on every trade. Stick to liquid underlyings where the spread is under 5% of the option price.

Frequently Asked Questions