Reliance is soon launching its rights issue. The F&O contracts of a company’s shares are adjusted on the ex-date (in this case, May 13th) to incorporate the effect of such corporate actions. On the basis of the closing price of Reliance in the cash market, the exchange will arrive at an adjustment factor to modify:
- The number of shares per lot for futures and options contracts
- The strike price for options contracts
Edit - May 12, 2020
NSE has modified the lot size to 505 shares per lot for F&O contracts.
Check this circular for the updated strike prices of options contracts by multiplying the current strike price by the adjustment factor 0.990610. For example, 1400 CE will become 1386.85 CE, 1300 PE will become 1287.80 PE, and so on.
Similarly, the futures adjusted price will be the closing price on May 12th multiplied by the adjustment factor.
|Contract||Closing Price on May 12th||Adjusted Price|
You can check this circular from NSE for an illustration on how the adjustment factor is calculated.
Your positions will be brought forward from May 12th to 13th by adjusting the lot size and contract price in accordance with the adjustment factor. In accordance with the above example, the strike price for options will be reduced by the “benefits per share” and the lot size will be increased by dividing the current lot size (i.e. 500) by the adjustment factor.
Please note that this calculation is dependent on the closing price of Reliance shares on May 12th.