What Happens to an Option If the Underlying Stock Has

question 35

Multiple Choice

What happens to an option if the underlying stock has a 3-for-1 split?

• A) There is no change in either the exercise price or in the number of options held.
• B) The exercise price will adjust through normal market movements; the number of options will remain the same.
• C) The exercise price would become one-third of what it was, and the number of options held would triple.
• D) The exercise price would triple, and the number of options held would triple.
• E) There is no standard rule-each corporation has its own policy.

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Definitions:

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