What Happens to an Option If the Underlying Stock Has

question 19

Multiple Choice

What happens to an option if the underlying stock has a 2-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-half of what it was, and the number of options held would double.
• D) The exercise price would double, and the number of options held would double.
• E) There is no standard rule-each corporation has its own policy.

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Definitions:

Minimum Yield Strength

The lowest stress at which a material begins to deform permanently, important in material selection for engineering.

Twisting Force

Also known as torque, it's the force that causes an object to rotate about an axis, fulcrum, or pivot.

Tightening Nuts

The process of securing nuts onto bolts or studs to a specified torque, ensuring a stable assembly.

Click-Type Torque Wrenches

Tools that make an audible click sound to signal when the pre-set torque level has been reached, ensuring proper tightening of bolts.