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FINRA Series 7

Category - Series 7

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Bubba held one XYZ July 30 listed call option when XYZ split 2 for 1. What is the resulting position Bubba has on the Option Clearing Corporation’s record?

long one XYZ July 30 call
long one XYZ July 30 call and short one XYZ July 30 call
long two XYZ July 30 calls
long two XYZ July 15 calls

Explanation

Answer: D - long two XYZ July 15 calls. Double the number of contracts and half the strike price. This is similar to XYZ shareholders doubling the number of shares they hold at the lower price.

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