Jubilant Foodworks Ltd. (JUBLFOOD) has announced split in face value of its equity shares from FV of Rs. 10 per share to Rs. 2 per share and has fixed April 20, 2022 as the record date.
As a result, the Futures and Options contracts on Jubilant Foodworks will be adjusted according to the framework prescribed by SEBI. The adjustment will result in a change in the Strike Price and Lot Size of Options and the Price and Lot Size of the Futures contracts. The changes will come into effect on the ex-date, April 19, 2022. You can check the announcement from the exchange here.
SEBI has prescribed a framework to the exchanges for adjustment of corporate actions in derivative contracts at the time of the corporate action. The exchange has published everything regarding the adjustments in the case of corporate actions here. The adjustments are carried out so that the value of the position of the market participants, on the cum and ex-dates for the corporate action, continues to remain the same as far as possible.
Here’s how the adjustment works out:
The adjustment factor for the Stock split of A:B is defined as (A/B). In the case of Jubilant Foodworks, the adjustment factor is (5/1) = 5, since the split ratio is 5:1.
Adjustment of Futures Contracts:
Futures base price: The adjusted futures base price will be arrived at by dividing the settlement price of the future one day before the ex-date by the adjustment factor.
Futures lot size: The adjusted market lot will be arrived at by multiplying the old market lot by the adjustment factor. The revised market lot would be 625.
For example:
Assume you are holding a position in Jubilant Foodworks DEC Futures and on pre-ex-date (April 18, 2022) futures close at 2740.35, on ex-date the price will be adjusted to 548.10 (Price on pre-ex-date: 2740.35 / Adjustment Factor: 5). While the lot size will be adjusted to 625 (Current lot size: 125 * Adjustment Factor: 5).
Adjustment of Options Contracts:
Strike Price: The adjusted strike price will be arrived at by dividing the old strike price by the adjustment factor.
Lot Size: The adjusted lot size will be arrived at by multiplying the old market lot by the adjustment factor. The revised lot size would be 625.
For example:
Assume you hold a position in Jubilant Foodworks 2750 CE, the current lot size is 125. On ex-date, the 2750 CE will be adjusted to 550 (Strike Price: 2750 / Adjustment Factor: 5) and the lot size will be adjusted to 625 (Current Lot Size: 125 * Adjustment Factor 5).
While those holding positions in F&O contracts are not eligible for corporate action benefits. If you are holding equity shares of Jubilant Foodworks on ex-date (April 19, 2022) you will be eligible to receive the split shares. The credit of shares can take up to 2 working days from the record date (April 20, 2022). You can check out more details here.