Explanation:
Share buybacks and cash dividends do not have an explicit effect on options contracts. However, they are explicitly adjusted for stock splits and stock dividends.
(Book 3, Module 38.2, LO 38.c)
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Question 65
Which of the following statements regarding options when the underlying security is an individual stock is correct?
A
Option contracts are explicitly adjusted for cash dividends.
B
Option contracts are explicitly adjusted for stock splits.
C
Option contracts are explicitly adjusted for implemented share buybacks.
D
Option contracts are explicitly adjusted for announced share buybacks.
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