NMDC Limited (NMDC) has announced the issue of bonus shares in the ratio of 2:1 (2 equity shares for every 1 equity share held) and has fixed December 27, 2024, as the ex/record date, to determine the shareholders who will be eligible for bonus issue.
As a result of NMDC Limited announcing the issue of bonus shares, the Futures and Options contracts in NMDC will be adjusted according to the framework prescribed by SEBI. The adjustment will be both in Strike Price and Lot Size of Options and Price and Lot Size of the Futures contract. You can check the announcement from the exchange here.
SEBI has prescribed a framework for exchanges to adjust 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 in such a way that the value of the position of the market participants, on the cum and ex-dates for the corporate action, continue to remain the same as far as possible.
Here’s how the adjustment works out:
Calculation of the adjustment factor:
The adjustment factor for a bonus issue of A: B is defined as (A+B)/B. For NMDC Limited, the adjustment factor is (2+1)/1 = 1, since the bonus issue ratio of 2:1.
Adjustment for Options Contracts:
Strike Price: The adjusted strike price is calculated by dividing the old strike price by the adjustment factor.
Lot Size: The adjusted lot size is arrived at by multiplying the old market lot by the adjustment factor. The revised lot size would be 13500.
Example:
Assume you hold a position in NMDC Limited 200 CE, the current lot size is 4500. On ex-date, the 200 CE will be adjusted to 67 (Strike Price 200 / Adjustment Factor 3) and the lot size will be adjusted to 13500 (Current Lot Size: 4500 * Adjustment Factor 3).
Adjustment for Futures Contracts:
Futures base price: The adjusted futures base price is 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 13500.
Example:
Assume you are holding a position in NMDC JAN FUT and on pre-ex-date (Dec 26, 2024) futures close at 210, on ex-date the price will be adjusted to 70 (Price on pre-ex-date: 210 / Adjustment Factor: 3)
While the lot size will be adjusted to 13500 (Current lot size: 4500 * Adjustment Factor: 3).
Holders of F&O contracts are not eligible for corporate action benefits.
If you hold equity shares of NMDC Limited on ex-date (December 27, 2024) you will be eligible to receive the bonus shares. The bonus shares are typically credited to your demat account within 2 trading days following the record date (December 27, 2024). You can learn more about this here.
You can learn more about what bonus issue is here: