When a Share Price Increases by a Certain Percentage, the Price

question 94

True/False

When a share price increases by a certain percentage, the price of a call option on the same share increases by a lower percentage amount.

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Definitions:

Shares Outstanding

The total number of shares of a company held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Preferred Stockholders

Investors who own preferred shares in a company, which often grant dividends before common stockholders and have priority in asset liquidation.

Voting Rights

The rights of shareholders to vote on corporate matters, such as the election of the board of directors.

Dividend Payments

Cash payments made by a company to its shareholders, often as a distribution of profits.