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4.An investor has exchange-traded put options to sell 100 shares for $20. There is 25% stock dividend. Which of the following is the position of the investor after the stock dividend?
A.Put options to sell 100 shares for $20
B.Put options to sell 75 shares for $25
C.Put options to sell 125 shares for $15
D.Put options to sell 125 shares for $16
A.Put options to sell 100 shares for $20
B.Put options to sell 75 shares for $25
C.Put options to sell 125 shares for $15
D.Put options to sell 125 shares for $16
Answer: D
The stock dividend is equivalent to a 5 for 4 stock split. The number of shares goes up by 25% and the strike price is reduced to 4/5 of its previous value.
The stock dividend is equivalent to a 5 for 4 stock split. The number of shares goes up by 25% and the strike price is reduced to 4/5 of its previous value.
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015