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04 Feb 2024, 09:30 PM
Adjustment of F&O contracts of GAIL due to dividend
As per NSE circular (web), effective February 06, 2024, the strikes of GAIL 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 GAIL will be marked-to-market on the last cum-dividend date i.e. February 05, 2024, 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. 5.50 (dividend amount) for the respective futures contract.
From February 06, 2024 (ex-dividend date), daily mark-to-market settlement of the futures contracts will continue as per normal procedures.
For example:
Assume you bought 1 lot (4575 quantities) of GAIL futures on February 05, 2024, at Rs. 180, and the daily settlement price at the market close is Rs. 183, you would have made a mark-to-market profit of Rs. 3 per share.
On February 06, 2023, the previous day’s position will be carried forward at Rs. 177.5 (i.e. 183 – 5.5). If the closing price on February 06, 2024, is Rs. 178.5, you’ll make a mark-to-market profit of Rs. 1 per share.
Adjustment for options contracts:
The full value of the dividend i.e. Rs. 5.5 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. 180 Call Option will be reduced to Rs. 174.5 on February 06, 2024, and the positions in Rs. 180 Call Option will continue to exist in Rs. 174.5 Call Option.
The lot size of the F&O contracts will not change.
Also, if you hold equity shares of GAIL in your demat account as of February 06, 2024 (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.