Adjusted option contracts

Learn why corporate actions can change option terms and how to check the actual shares or cash a contract delivers.

By OptionsKing. Publisher and editorial methods.

The standard stock-option examples in this course use 100 shares per contract. A corporate action can change those terms. An adjusted option is an existing contract whose terms have been modified to account for an event such as a split, merger, or special distribution.

Why terms may change

A stock split changes the number of shares and their price without, by itself, creating the same proportional change in the company's total value. Leaving every option term unchanged could change the economic right in an unintended way. Contract adjustments address such events under the applicable rules.

The exact adjustment depends on the event. Some actions change strikes and contract counts; others change the deliverable, meaning the shares, cash, or other assets exchanged on exercise. Not every corporate action produces the same kind of adjustment.

Separate two quantities

The premium multiplier converts a quoted premium into a contract payment. The deliverable states what changes hands on exercise. For an ordinary stock option both involve 100 shares, but an adjusted contract can make them differ.

Consider a hypothetical adjustment notice that specifies a 100 premium multiplier and a deliverable of 25 shares. A $2.00 quoted premium still costs $200. It does not mean the contract delivers 100 shares. This is an illustration of reading terms, not a formula for any particular corporate action.

Check a covered position again

Suppose an investor owns 100 post-adjustment shares and has four of those hypothetical contracts, each delivering 25 shares. The total share deliverable is 4 x 25 = 100 shares. Coverage depends on that deliverable, not on applying the ordinary 100-share rule to every contract.

If a deliverable includes cash or shares of more than one company, owning 100 shares of one stock may be insufficient. Exercise payments also follow the adjusted terms; they should not be guessed from the quoted premium or share count alone.

Read the official adjustment notice

Use the exchange or clearing organization's contract-adjustment notice and the broker's contract details. Check the exact option symbol, multiplier, deliverable, strike, and exercise payment. In the U.S., OCC information memos are a primary source for OCC-cleared contract adjustments.

Adjusted and ordinary contracts can appear near each other in a chain. An unusual premium is a reason to inspect the terms. It does not establish that one contract is cheaper or more profitable than another.

Sources

• OIC, Splits, Mergers, Spinoffs and Bankruptcies

Rules and thresholds above were checked against these documents on October 21, 2026. Exchange and broker rules change. Confirm anything you are about to act on with your own broker.

Keep reading

• Options in splits and mergers
• Earnings and dividend dates in an option trade
• Reading an options chain

Do the math on your own trade

• Covered call calculator stock and call results from a consistent starting value.
• Position size calculator contract obligations relative to an account.
• Break-even calculator the expiration price at which profit is zero.

Every price in this article is an illustrative worked example, not a quote. Read Options basics for the rest of the series, and the disclaimer before you act on any of it. Selling options carries real risk of loss, and the loss can be far larger than the premium you collected.