Option Trading 6 Options on ABC Corp. have a strike of K=$600 per share. Lori holds...
Option Trading 6
Options on ABC Corp. have a strike of K=$600 per share. Lori holds two contracts. If the stock splits 5-for-2, then starting on the ex-date Lori will have:
Please Choose One
- Two contracts for 250 shares each with K=$240.
- Two contracts for 40 shares each with K=$600.
- Five contracts for 100 shares each with K=$240.
- Five contracts for 100 shares each with K=$600.
Homework Answers
The answer is
Two contracts for 250 shares each with K=$240.
Number of shares in contract before split = 100
After split, 5 shares will be issued for every 2 held
Hence, 100 shares will be converted into 250 shares
Strike price = 600*2/5 = $240
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