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Should we adjust greeks on stock splits? Let's just ask about splits instead of reverse splits. I'm also interested how answers change if we change models/assumptions.

I have some contradicting thoughts:

  1. We should not adjust, because market conditions are the same i.e. market cap stays the same, and we assume traders still act the same.
  2. Volatility increases which will affect greeks (at least the higher order derivatives taken w.r.t volatility). I think volatility increases because newer traders enter at the lower price point.

As I wrote this, I realized this may be a hidden "implied vs historical volatility" question, but I'm still interested in answers. Thanks!

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Disregarding exogenous factors, the unit of Gamma is 1/$ and the unit of Vega is \$/sigma so the raw greek values will change in a stock split.

Including exogenous factors, you're right, implied volatility and the greeks could change from the reaction to the event.

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