Six: The anticipation of the split should provide a tailwind to the share price.

Businesses don’t announce splits when they’re pessimistic and business is bad. It is the company saying they believe the share price will continue to rise. Five: The announcement of the split is a form of signaling.Four: The cheaper share price will make trades like covered calls and naked puts much easier to build given the lower capital requirement.The distance between strike prices will shrink giving more flexibility in strike selection too. Three: Options liquidity should also improve.That will tighten bid-ask spreads and make it easier to buy and sell. It could go up 4x after the split to 30 million shares. The 50-day average volume for NVDA right now is 7.5 million. Two: It increases the daily trading volume, and thus liquidity.One: It cheapens the share price bringing a new class of potential buyers into the fray that were previously turned off by the sky-high price.There are 6 reasons why traders should cheer the news:

You had $60,000 in Nvidia before the split, and you have $60,000 after it. Notice how there’s no net change in the value of the position. That means the stock will drop to 1/4th its current value, but each shareholder will receive four shares for every one share they previously owned like so:

The second came from the iShares Gold Trust, IAU, and was a reverse split that lifted the share price while decreasing the number of shares. The first came from semiconductor giant, Nvidia, and was a traditional split where they lower the share price while increasing the number of shares. Two stock splits were announced on the Street this week and it provides a teaching moment.

Nvda stock split announcement