30 Part I: Basic Properties ol Stock Options 
increased and the strike price is decreased, and each option still represents 100 
shares of the underlying stock. 
In this case, the strikes listed above (110 through 130) would be adjusted to• 
become new strikes: 36.625, 38.375, 40, 41.625, and 43.375. The 40 strike would be 
assigned the standard strike price symbol of the letter H. However, the others would 
need to be designated by the exchange, so U might stand for 38.375, V for 41.625, 
and so forth. 
Example 4: When a split does not result in a round lot, a different adjustment must 
be used for the options. Suppose that AAA Corp. (symbol: AAA) is trading at $60 per 
share and declares a 3-for-2 split. In this case, each option's strike will be multiplied 
by two-thirds (to reflect the 3-for-2 split), but the number of contracts held in an 
account will remain the same and each option will be an option on 150 shares of AAA 
stock. 
Suppose that there were strikes of 55, 60, and 65 preceding this split. After the 
split, AAA common itself would be trading at $40 per share, reflecting the post-split 
3-for-2 adjustment from its previous price of 60. There would be new options with 
strikes of 36.625, 40, and 43.375 (these had been the pre-split strikes of 55, 60, and 
65). 
Since each of these options would be for 150 shares of the underlying stock, the 
exchange creates a new option base symbol for these options, because they no longer 
represent 100 shares of AAA common. Suppose the exchange says that the post-split, 
150-share option contracts will henceforth use the option symbol AAX. 
After the split, the exchange will then list "normal" 100-share options on AAA, 
perhaps with strike prices of 35, 40, and 45. This creates a situation that can some­
times be confusing for traders and can lead to problems. There will actually be two 
options with striking prices of 40 - one for 100 shares and the other for 150 shares. 
Suppose the July contract is being considered. The option with symbol AAAGH is a 
July 40 option on 100 shares of AAA Corp., while the option with symbol AAXGH is 
a July 40 option on 150 shares of AAA Corp. Since option prices are quoted on a per­
share basis, they will have nearly identical price quotes on any quote system (see item 
5). If one is not careful, you might trade the wrong one, thereby incurring a risk that 
you did not intend to take. 
For example, suppose that you sell, as an opening transaction, the AAXGH July 
40 call at a price of 3. Furthermore, suppose that you did not realize that you were 
selling the 150-share option; this was a mistake, but you don't yet realize it. A couple 
of days later, you see that this option is now selling at 13 - a loss of 10 points. You 
might think that you had just lost $1,000, but upon examining your brokerage state­
ment (or confirms, or day trading sheet), you suddenly see that the loss is $1,500 on