Consider an exchange traded call option contract to buy 500 shares with a strike price of $40 and maturity in four months Explain how the terms of the option contract change when there is a) A 10 stock dividend b) A 10 cash dividend c) A 4 for 1 stock split ...

a The option contract becomes one to buy 500 11 550 shares ...

Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and

Question:

Consider an exchange-traded call option contract to buy 500 shares with a of $40 and in four months. Explain how the terms of the option contract change when there is
a) A 10% stock
b) A 10% cash
c) A 4-for-1 stock split
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...