CFA Practice Question

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CFA Practice Question

In calculating EPS, warrants are NOT similar to traded options in that ______

I. both have exercise prices
II. both depend on changes in the underlying stock to determine value
III. warrants affect the number of shares outstanding but traded options don't.
Correct Answer: III only

User Contributed Comments 12

User Comment
ivasonik Why? Does any of them really affect number of shares outstanding?
charliedba Traded options do not affect the number of shares outstanding. Warrants do.
gkobylko Warrans are issued by the Company. Traded options are issued by 3rd parties.
AkuK "Traded options" is the trick
nayagan gkobylko correct
bundy total trick question.
crunty Options do but 'Traded options' dont because you are trading the option with another dealer for its own intrinsic value.
Saxonomy crunty for president
jonan203 traded options are contracts between investors/hedgers and traded on exchanges, the company is not involved.
vfelix26 Read the way the question is written, "NOT" similar.. I & II are immediately out because of the way they are worded, "Both."
Inaganti6 the question answers itself but why the answer is right is beyond me. I still don't get it.
Inaganti6 Oh ok I get it. It seems traded options are totally out of the sphere of the company's issuance and control. They are derived from the shares the company issued officially and have no bearing on the company's capital structure as they're private agreements between private parties.
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