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03 Nov 2023, 08:40 AM
Adjustment of F&O contracts of IOC due to dividend
As per NSE circular (WEB), effective November 10th, 2023, the strikes of IOC options and the base price of the futures contracts will be revised due to extraordinary dividends.
Adjustment for future contracts:
All positions in futures contracts of IOC will be marked-to-market on the last cum-dividend date i.e. November 09th, 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. 5 (dividend amount) for the respective futures contract.
From November 10th, 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 (9750 quantities) of IOC futures on November 09th, 2023, at Rs. 95, and the daily settlement price at the market close is Rs. 97, you would have made a mark-to-market profit of Rs. 2 per share.
On November 10th, 2023, the previous day’s position will be carried forward at Rs. 92 (i.e. 97 – 5). If the closing price on November 10th, 2023, is Rs. 94, you’ll make a mark-to-market profit of Rs. 2 per share.
Adjustment for options contracts:
The full value of the dividend i.e. Rs. 5 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. 95 Call Option will be reduced to Rs. 90 on November 10th, 2023, and the positions in Rs. 95 Call Option will continue to exist in Rs. 90 Call Option.
The lot size of the F&O contracts will not change.
Also, if you hold equity shares of IOC in your demat account as of November 10, 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.