EFTA Document EFTA01393108

As a general rule, stock dividends, stock distribu- tions and stock splits can result in an adjustment in the number of underlying shares or the exercise price, or both. EXAMPLE: An investor bought an XYZ 60 op- tion-either a call or a put-and XYZ Corporation sub- sequently effected a 3 for 2 stock distribution. Instead of covering 100 shares of stock at an exercise price of $60 a share. each outstanding option could be ad- justed to cover 150 shares at an exercise price of $40 per share.