15 Feb 2024, 02:41 PM

Adjustment of F&O contracts of HEROMOTOCO due to dividend

As per NSE circular (web), effective February 22, 2024, the strikes of HEROMOTOCO 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 HEROMOTOCO will be marked-to-market on the last cum-dividend date i.e. February 21, 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. 100 (dividend amount) for the respective futures contract.

From February 21, 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 (300 quantities) of HEROMOTOCO futures on February 20, 2024, at Rs. 4800, and the daily settlement price at the market close is Rs. 5000, you would have made a mark-to-market profit of Rs. 200 per share.

On February 21, 2024, the previous day’s position will be carried forward at Rs. 4700 (i.e. 4800 – 100). If the closing price on February 21, 2024, is Rs. 4800, you’ll make a mark-to-market profit of Rs. 100 per share.

Adjustment for options contracts:

The full value of the dividend i.e. Rs. 100 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. 5000 Call Option will be reduced to Rs. 4900 on February 07, 2024, and the positions in Rs. 5000 Call Option will continue to exist in Rs. 4900 Call Option.

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

Also, if you hold equity shares of HEROMOTOCO in your demat account as of February 21, 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.