22 Aug 2023, 10:00 PM

Adjustment of F&O contracts of NMDC Limited

As per NSE circular (WEB), effective August 31st, 2023, the strikes of NMDC options and the base price of the futures contracts will be revised due to extraordinary dividend.

Adjustment for future contracts:
All positions in futures contracts of NMDC will be marked-to-market on the last cum-dividend date i.e. August 30th, 2023, based on the daily settlement price of the respective futures contract. Subsequently, open positions will be carried forward at the daily settlement price less Rs.2.85 (dividend amount) for the respective futures contract.

From August 31st, 2023 (ex-dividend date), daily mark-to-market settlement of the futures contracts would continue as per normal procedures.

For example:
Assume you bought 1 lot (4500 quantity) of NMDC futures on August 30th, 2023, at Rs. 120, and the daily settlement price at the market close is Rs. 125, you would have made a mark-to-market profit of Rs. 5 per share.

On August 31st, 2023, the previous day’s position will be carried forward at Rs. 122.15 (i.e. 125 – 2.85). If the closing price on August 31st, 2023, is Rs. 130, you’ll make a mark-to-market profit of Rs. 7.85 per share.

Adjustment for options contracts:
The full value of the dividend i.e. Rs. 2.85 will be deducted from all the cum-dividend strike prices on the ex-dividend date. All positions in existing strike prices will continue to exist in the corresponding new adjusted strike prices.

For example:
The strike price of Rs. 120 Call Option will be reduced to Rs. 117.15 on August 31st, 2023, and the positions in Rs. 120 Call Option will continue to exist in Rs. 117.15 Call Option.

The lot size of the F&O contracts will not change.

Also, if you hold equity shares of NMDC in your demat account as of August 31st, 2023 (ex-date) you will be entitled to receive the dividend which will be credited directly to your primary bank account within 30 to 45 days from the record date.