To adjust for stock splits
A) the exercise price of the option is reduced by the factor of the split, and the number of options held is increased by that factor.
B) the exercise price of the option is increased by the factor of the split, and the number of options held is reduced by that factor.
C) the exercise price of the option is reduced by the factor of the split, and the number of options held is reduced by that factor.
D) the exercise price of the option is increased by the factor of the split, and the number of options held is increased by that factor.

Question

Quizplus · Accepted Answer

When a stock splits, the exercise price of options is adjusted downwards by the split factor, and the number of options held by the investor is increased by the same factor to maintain the overall value of the options.

To Adjust for Stock Splits