So Tesla runs up massively upon speculation of S P 500 inclusion and ever increasing estimates for future growth. It then cools off after earnings and then boom. Earlier this week, they announced that they'll be doing a five to one stock split, and since it's ran up about 15 percent. but it is time that we have an actual conversation about how to exploit these splits and the way that you are screwing yourself over by following the wrong advice on them and having the wrong perspective.

And this is important. Not just because Apple and Tesla are splitting, but because there are many, many rumors spreading around that other major companies such as Google, Amazon, and Netflix are splitting. And while Tesla ran up 15 since announcement, Apple has slightly even beat that. So there is value in understanding how to trade splits, But a lot of people in the media right now are calling you an idiot for buying a stock split because the actual value of a company doesn't change during a split.

But the media is missing the whole point here. Sure, when you have a five to one stock split, that just means that if you owned one share of Tesla at say 1643, you now have five shares valued at 328 immediately after the split. Which means you still have 1643 in totality. Which means you still control 1600.43 worth of Tesla in totality.

So it's basically the same thing. So technically, a stock split itself is almost entirely an optical and psychological move. Sure, the price per stock is cheaper, but nothing in the company has really changed. And sure, buying a stock split because you see value in the split itself is sort of like wearing a mask when you are alone in your car.

It doesn't really make sense, but it seems like everyone is still doing it. And I spent some time watching how various media outlets covered the stock split. And let me just say, I was really entertained by how dumbfounded a lot of these analysts were when asked why Tesla's stock went up. Let's let's play a few clips.

Agree with Karen, it's absurd. Like, I mean, there's nothing. I'm on board too. I'm on board with you guys.

So I mean, I don't really get this thing. six percent rise now, but you know, so be it here we are. The absurdity of it is just. but it speaks volumes as to what's going on and you know this is gonna.

I'm gonna get added for this, but I think for a lot of people they'd rather be long. Uh, five shares of a 200 stock as opposed to one share of a thousand dollar stock. The media won't even recognize the emotionality of the market and the opportunity in that, instead of yelling at us and calling us idiots for trading a stock split Catalyst, they could have instead trusted us to walk and chew gum at the same time. they could have said, hey, you know a stock split doesn't actually change the underlying company, but it does create a catalyst for us to trade off of.

And if it does that, hey, that's a great opportunity. But the reason that they don't say this is so that they can push their agenda, the agenda of having you need them to manage your money and this is how they do it. They start by making you think that the stock market should be based on logical valuations, analysis from experts and a history of charts, and then they'll say, oh, you know everything in the stock market is based on our valuation models And then if something is trading above or below what those stupid quote-unquote logical numbers say it's worth the media then say oh, this, This is not right. This is ridiculous.

The number that this stock is trading at, It's unprecedented. I don't understand this is going to crash or this is going to fall. No one seems to care how clean this run was to trade off of, and instead they're all trying to convince you that buying into Catalysts and managing your risk is just gambling. Anything that is not following the status quo of buying into blanket index funds or mutual funds and just keeping your money sitting there and paying fees is considered gambling.

To these people, the corporate agenda is to make you think that any personal management of your own hard-earned money is gambling, but for some reason hiring one of their funds to do it for you is just smart investing. And the idea behind this isn't hidden. The idea is to get you away from thinking for yourself and instead brainwash you into following what they want you to follow so that they can receive your fees and they can get your market power. And the reason this is so infectious is because so many of you do decide to be irresponsible when you have money on your own hands and you do decide to trade like gambling morons.

The key with these plays is not drinking your own kool-aid If you are playing a split or really any sort of catalyst, you are playing it because it is serving as a strong catalyst to cause a run. But you aren't holding it randomly thinking this is actually something of value. You look at what the financial media is saying. If you look at tons and tons of articles, you see oh, fluctuations.

these fluctuations. They didn't really happen. This isn't really real. it's just people buying and selling blah blah blah.

Of course it is real when they call it out ahead of time. But when it happens based on something that they don't see is logical. They're like, oh, this isn't real. just look the other way.

And we saw this happen a few weeks ago with Apple as well. The Apple split has no value and you should stay away from trading it. Don't trade split splits change nothing. Of course they want you to think that catalysts only have value if they fit their agenda of you buying and holding their funds, or if they fit their agenda making them look smart.

When I was growing up, my dad always said trust half of what you see and none of what you hear and this is so true when it comes to analyst opinions. Okay, so let's talk about the actual value of a split. Now, I already explained what a split mechanically does earlier in the video. but what is the actual point of a split? Well, companies do a split if they want their share price to be lower and more efficient to serve their purposes.

We often cover the opposite of this on the channel: Reverse Splits: When you do a reverse split, you basically give your stock more room to drop. This is usually seen as a huge negative catalyst because you want to give it more room to drop. Companies that are declining in value will often use this as a technique so that their share price stays high enough and has more room to fall. But when you do a regular split, you are basically giving your stock more room to grow.

It's sort of like worrying that your company has done so well that it's becoming too expensive per share. Now, obviously, you can choose to just let the stock continue growing indefinitely, just like you can let it shrink indefinitely to decimal points. But there's a level of efficiency and optics that needs to be considered when it comes to prices per share, and that's what splitting and reverse splitting is all about. Think about it.

If you were Tesla and you were trading at 16.35 you are creating an optic that your stock is out of touch for many small investors, and this may also reflect on the exclusivity of your company. And if you have a small account, you won't be able to buy a ton of shares for sixteen hundred dollars. But if they split it down to 300 a share, all of a sudden it's in your range again. and so many people have bought in, expecting there to be a big influx of people that pour in during the time it gets lowered per share.

And while I know this makes a lot of people giddy and it might be true to some extent, I'm not a total believer in that argument because we already have fractional trading, which allows people to buy parts of stocks now anyways, for cheaper values. And yeah, some people would like to own a whole stock and that will likely cost some more influx. but is it really that high of a percentage? Does it really, really, really resonate with 15 a 15 increase in share price? Probably the influx into Tesla after a split would really be minimal, even if you have a lot of people buy in at a small share price, but still very small accounts and added up. it's is it really going to make a 15 jump in share price? I don't think so, folks.

but the optics of lowering the stock is where all the value seems to be. So in summary, the truth is that while a split has an optical and psychological benefit, the real benefit in terms of number is likely very, very little. The benefit in terms of speculation and hype, though, has already proven to be very large. But when it comes to announced catalysts, what you do is you play off the emotion.

You don't eat up the emotion yourself. This is an important lesson to learn now, because there are inevitable new splits coming in the upcoming weeks and months for different kickers. So what you can learn from this run is that the goal wasn't to believe the hype, but rather to play the hype itself. Buying in a confirmation of price rates and writing it up to validation would technically have allowed you to take most of this move while controlling your risk.

But there is more to it than that if you're not aware of how to acknowledge splits, if you're not aware of managing your elevating and deprecating factors, you can kiss this move out the window. But there is still more to it than that. The split is going to be going through towards the end of the month, and you may be wondering if there will be some more runs to play off of. Well, as we finished this week, we did start cooling off a bit.

But here's the thing you see: This run was mostly caused by short-term trading. If you are someone who is holding Tesla long term, you likely don't give a hoot about a stock split. It makes no difference to you. Well, maybe you were annoyed about the 38 to 45 dollar fee you'll have to pay for the broker to deal with your split, but overall, it doesn't mean too much to you.

So the ones that bought this run are mostly traders. and when short-term money flows into a stock, it creates the inevitability of volatility. as short-term money is much more volatile than long-term money. Short-term money likes to move around.

long-term money. It likes to stay put. That means that I wouldn't be surprised whatsoever if Tesla decided to cool off more next week. And then all of a sudden a small spike becomes a self-fulfilling prophecy as tons of traders pour back into it and cause it to run up, luring in even more traders.

And this is sort of the whole goal of trading. We trade the fluctuations, but the key isn't so much anticipating them, but rather playing the setups at hand. I would focus on playing any pre-anticipatory runs to the split itself, but the goal is to acknowledge that there is opportunity in these splits so that when you become aware of them in the future, you can plot your entry points for the post split. There isn't any real evidence across the entire market that points to the idea that splits always results in immediate increases afterwards.

In fact, if we run up a lot pre-split it would be expected that Tesla would crash upon the actual split as traders take their money out and crush investors. So I would focus on playing the pre-run and the post run separately if we get another. great setup pre-run Fantastic. If we get another great setup post run.

Fantastic. If we don't, we stay out because we trade like spoiled brats. Okay, but anyways, to wrap this up in summary, the way to make money off splits is to play the hype but not fall for the hype yourself. Okay folks, well I do hope this video was valuable to you.

If you have any questions whatsoever, feel free to reach out to us in the comments section below or join us on our lovely Zip Trader Circle. On Ziptrader Circle we also post our nightly watch lists and we have a ton of other great stuff on there. So if you are dedicated to trading, go ahead and join us on Zip Trader Circle. And lastly, if you're wondering what broker to trade these stocks on, we always like to send new traders over to Weeble, and Weeble is offering two free stocks if you sign up with our link below.

Anyways, folks, have a great day and I'll see you in the next video.